Britain’s economy grew by just 0.1% in the final quarter of last year and by the same rate in December, adding to pressure on Chancellor Rachel Reeves to ease cost pressures on businesses.
The monthly figure for November was revised down from 0.3% to 0.2%. For the whole of 2025 GDP is expected to have increased by 1.3%, following growth of 1.1% in 2024.
Liz McKeown, director of economic statistics at the Office for National Statistics, said growth was seen “in all main sectors”, though the usually dominant services sector showed no growth, with the main driver instead coming from manufacturing. Construction registered its worst performance in more than four years.
She said it is the “first time we haven’t seen quarterly growth in services in two years”.
The Bank of England has already revised down its growth forecasts for the UK, cutting 2026 projections from 1.2% to 0.9% and 2027 from 1.6% to 1.5%.
The figures come ahead of the spring statement on 3 March when the Chancellor will update on the economy but is not expected to announce any changes to tax.
Responding to today’s data, she insisted the government was taking appropriate measures to stimulate the economy.
“Thanks to the choices we have made, we’ve seen six interest rate cuts since the election, inflation falling faster than predicted and ours is the fastest growing G7 economy in Europe,” she 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.”
Economists took a more critical view and said more needed to be done to support business.
Ben Jones, senior lead economist at the CBI, said: “The Spring Forecast should be a critical delivery moment for the government’s growth mission.
“Businesses want to see government take action to speed up relief for high industrial energy costs, collaborate with firms to find appropriate landing zones for the Employment Rights Act, and make real progress on tax simplification to ease the cost of doing business.”
Luke Bartholomew, deputy chief economist, at Abderdeen said: “It is still hard to see what will drive a sustained increase in the underlying rate of growth this year.
“All of which means that the Bank of England is set to continue to lower interest rates to try to support growth, and we expect the next cut at the March meeting.”
Jeremy Batstone-Carr, European Strategist at Raymond James Investment Services, said: “Rate-setters on the Bank of England’s Monetary Policy Committee have adjusted their hitherto cautious rhetoric and appear ready to cut the base rate for a seventh time, perhaps sooner rather than later.
“Financial markets have been quick to price in another near-term rate cut in March and today’s downbeat activity data, coupled with slowly falling price pressures mean that households and businesses might not have to wait too long for a further policy loosening.”
David Bharier, head of research at the British Chambers of Commerce, said: “Improving the outlook now depends on restoring business dynamism.
“Government must move from strategy to delivery – backing infrastructure projects, speeding up planning decisions, addressing skills gaps, and strengthening export support – so firms can invest, export and grow.”
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