UK economy grows by only 0.1% amid falling business investment
The UK economy expanded by only 0.1% in the final three months of last year, according to official data, as falling business investment and weak consumer spending led to little momentum going into 2026.Figures from the Office for National Statistics (ONS) show that the economy grew at the same rate of 0.1% as the previous three months.This was less than a 0.
2% rise that economists had been expecting.The economy grew by 1.3% in 2025, an improvement on growth of 1.1% in 2024, although worse than official forecasts of 1.5%.
The ONS said the economy also expanded by 0.1% on a monthly basis in December, slowing from 0.2% in November – a figure that was revised down from 0.3%.The rise came despite there being no growth at all in the dominant services sector, which makes up about 80% of the economy.
The small boost was instead driven by the production sector, up by 1.2%, while the construction industry shrank 2.1%, its worst performance in four years, the ONS said.Liz McKeown, the director of economic statistics at the ONS, said: “The economy continued to grow slowly in the last three months of the year, with the growth rate unchanged from the previous quarter.“The often-dominant services sector showed no growth, with the main driver instead coming from manufacturing.
Construction, meanwhile, registered its worst performance in more than four years.”Business investment fell by 2.7% in the final quarter, while consumer spending grew by a sluggish 0.2%.The figures back up earlier consumer and business surveys that suggested economic activity had slowed in the run-up to the late November budget, as households held off spending and companies delayed investment decisions amid speculation that the chancellor would implement significant tax rises.
“The big picture is that private sector activity still appears to be extremely subdued,” said Ruth Gregory, the deputy chief UK economist at Capital Economics.The UK economy fared relatively well in the first half of 2025, with growth of 0.7% in the first quarter and 0.3% in the second quarter.However, economic output was then hit by the cyber-attack on Britain’s biggest carmaker, Jaguar Land Rover, which depressed vehicle production and led to the minimal growth in the third quarter.
Speculation around the autumn budget appears to have further hindered growth in the final three months.“These figures confirm that the UK economy ended 2025 with a whimper,” said Suren Thiru, the economics director at the Institute of Chartered Accountants in England and Wales.“Businesses had a particularly bleak quarter as the dark cloud of uncertainty caused by the budget and higher costs severely curtailed trade and investment plans.”However, more recent surveys for January have suggested that business and consumer sentiment picked up in the new year, with economists expecting growth of 0.4% in the first quarter of 2026.
Fergus Jimenez-England, an associate economist at the National Institute of Economic and Social Research, said the government must avoid spooking businesses any further.“With the spring statement upcoming in March, the chancellor should look to support this change in sentiment by avoiding a repeat of last year and refrain from further policy changes,” he said.The Office for Budget Responsibility had forecast GDP growth to be 1.5% in 2025 and 1.4% in 2026.
The government’s official forecaster expects the economy to grow at annual pace of 1.5% up to 2030, partly because of low productivity growth.Bank of England policymakers left interest rates unchanged at 3.75% last week but indicated that lower inflation as a result of cost of living measures in Reeves’s budget should pave the way for cuts in the months ahead.Reeves, who on Wednesday insisted Labour could win the political argument for a closer relationship with the EU, said: “The government has the right economic plan to build a stronger and more secure economy, cutting the cost of living, cutting the national debt and creating the conditions for growth and investment in every part of the country.
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UK economy grows by only 0.1% amid falling business investment
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