The UK economy was flat in the final quarter of last year, with GDP growth of just 0.1%, according to the latest data from the Office for National Statistics.
December saw an uplift of 0.1%, in line with expectations, but November’s growth has been revised down to 0.2% from the 0.3% first reported.
For the calendar year, GDP is estimated to have grown by 1.3% in 2025, a rise of 0.2% from the 1.1% in 2024.
With growth remaining lacklustre, the Bank of England is likely to feel the pressure to continue to lower interest rates to try to support growth.
Adam Hoyes, senior asset allocation analyst at Rathbones, said: “The Bank of England made it clear last week that we should expect further interest rate cuts over the course of 2026. Today’s data suggests that is a sensible assumption, and at the margin, may convince some of the more hawkish members of the Monetary Policy Committee to put a bit more weight on the downside risks to activity and consider backing rate reductions. Though it’s unlikely to move the dial substantially, and near-term market expectations for Bank Rate are little changed so far today."
Lindsay James, investment strategist at Quilter, said it is clear the economy is still very fragile.
She said the Bank of England will be watching the GDP figures very carefully: “While the picture is rather bleak at the moment, some optimism is warranted if inflation falls. Should it come back down to the Bank of England’s 2% target, the door could open to more significant rate cuts later in the year.
“We should now be reaching a place where peak uncertainty is behind us, and businesses are better able to plan for the post budget and post trade deal world. However, the well flagged leadership challenge – which headlines would have us believe is fast becoming a case of when rather than if – risks derailing that. Should that materialise and we see a lurch to the left, it could result in higher spending, higher taxes and even weaker growth. Only time will tell how it plays out.”
Derrick Dunne, CEO of You Asset Management, said the ongoing economic uncertainty could see Britons looking to consult with a financial adviser.
He said: “These figures are a real warning shot across the bows of the Government and Bank of England, both of whom are trying to steer the economy with tighter fiscal and monetary policies than are probably now healthy.
“The real bellwether here is construction, which tends to lead other indicators in terms of what the economy is doing. The final quarter of 2025 will have been heavily impacted by the Budget speculation mess that prevailed, but the worst performance in more than four years is a real red flashing warning signal. Services didn’t grow at all either. The economy’s blushes were only saved by strong manufacturing growth.
“Ultimately it shows just how inherently fragile the UK’s economic performance is at the moment. What it needs is stability and continuity. A dose of lower rates, with the labour market continuing to weaken, might be a helping hand too.”