Economy grows by worse-than-expected 0.1% in final quarter of 2025

Early official figures are doing nothing to dispel concerns the economy remains stuck in the doldrums.

The Office for National Statistics (ONS) has reported growth of 0.1% for the final quarter of 2025 - mirroring the 0.1% figure covering July to September - worse than the 0.2% expected by many economists.

Growth of 0.1% was measured for December, with activity easing following the pre-November slowdown partly blamed on nerves among consumers and the private sector ahead of the budget.

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The data was worse when growth was measured by head of population - a more accurate measure of the country's living standards - with output down across the second half of 2025.

ONS director of economic statistics, Liz McKeown, said of its findings: "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.

"The rate of growth across 2025 as a whole was up slightly on the previous year, with growth seen in all main sectors.

"Initial estimates show GDP per head was up on the previous year despite it contracting slightly in each of the last two quarters."

The data was released as the government remains under pressure to incentivise investment against a backdrop of complaints over Treasury-imposed business costs that have hit employment.

Growth for the economy has been front and centre of Labour's priorities for power from the off but its stewardship has been criticised by business groups, especially in the retail and hospitality sectors.

It also emerged this week that a senior member of the cabinet agreed.

The Health Secretary Wes Streeting told Lord Mandelson via a message in March last year, shared with Sky News this week, that the government had "no growth strategy at all".

Separately, a report by a committee of MPs on Wednesday demanded a series of reforms to arrest business closures and decline on the high street - including cutting costs, overhauling business rates and ending late payments.

The Business and Trade Committee found that small businesses were now operating under pressures similar to, and in some cases worse than, those experienced during the COVID pandemic.

Firms have widely admitted passing on higher employment costs while the UK's unemployment rate has risen by a full percentage point to 5.1% since the government took office in 2024.

Investment is being held back, business groups say, by not only higher costs but also wider uncertainties including the effects of Donald Trump's trade war.

Chancellor Rachel Reeves said of the growth figures: "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.

"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."

Inflation is forecast to ease sharply in the coming months after 18 months of upwards pressure on the pace of price increases.

But economists largely see 2026 just undershooting the 1.3% growth figure seen in 2025.

Yael Selfin, chief economist at KPMG UK, said he expected activity to pick up in the coming months but forecast growth of 1% for this year.

"Renewed uncertainty has emerged as a risk to the growth outlook this year. To avoid hindering economic growth momentum, households and businesses need stable foundations and policy clarity", he wrote, mirroring demands from opposition parties for a U-turn on business burdens imposed by the chancellor to unlock private sector investment.

(c) Sky News 2026: Economy grows by worse-than-expected 0.1% in final quarter of 2025