The UK’s economic landscape may be witnessing a flicker of optimism as the Office for National Statistics (ONS) prepares to unveil key GDP figures for December and the fourth quarter of 2025 this Thursday. Following a period marked by budgetary uncertainty, leading economists anticipate a slight expansion, potentially signalling a resurgence in consumer spending and business confidence.
Anticipated GDP Growth
Economists are largely forecasting a 0.1 per cent increase in GDP for the final quarter of 2025, a figure that some analysts believe could be even higher. This optimism stems from unexpectedly robust activity in November and the perception of enhanced clarity following the autumn Budget. This newfound confidence may have spurred businesses to ramp up spending ahead of the holiday season.
Earlier data from the ONS indicated a 0.1 per cent growth in the three months leading to September. However, the economy faced challenges in October, with a contraction of 0.1 per cent, before rebounding by 0.3 per cent in November, largely driven by a recovery in manufacturing at Jaguar Land Rover following a significant cyberattack.
Mixed Signals from December
While some forecasts suggest that December may have seen no growth, insights from Pantheon Macroeconomics highlight a nuanced picture. The firm’s analysis indicates that despite a lack of growth, the months leading to the end of the year were characterised by fluctuating activity levels. Various industry surveys have pointed out weaknesses in sectors such as housing, commercial construction, and civil engineering, which continue to struggle.
Conversely, there are indications that the easing of budget uncertainty may have positively influenced consumer behaviour. Victoria Scholar, head of investment at Interactive Investor, noted, “Economic activity likely picked up after the budget, as the cloud of uncertainty shifted to the rear view mirror in December.” She further suggested that there may have been an uptick in consumer spending in sectors like retail and hospitality during the festive period.
Bank of England’s Revised Projections
The outlook for the UK economy remains cautious, however. On the same day as the anticipated GDP release, the Bank of England announced a downward revision of its growth estimates. The central bank now expects the economy to have expanded by 1.4 per cent last year, slightly lower than its previous forecast of 1.5 per cent. Projections for 2026 have also been adjusted downwards from 1.2 per cent to 0.9 per cent, and from 1.6 per cent to 1.5 per cent for 2027.
Robert Wood, chief UK economist at Pantheon Macroeconomics, echoed the sentiment of tempered expectations, stating that while GDP growth might edge towards 0.2 per cent, he remains firm on the 0.1 per cent forecast. He commented that the overall activity in December suggests that budget-related uncertainties are dissipating quickly.
Why it Matters
The upcoming GDP data release is crucial for understanding the trajectory of the UK economy as it emerges from a period of instability. A positive growth figure could bolster confidence among businesses and consumers alike, paving the way for increased investment and spending as the nation heads into 2026. Conversely, a stagnant or negative result could reignite fears of economic stagnation, underscoring the delicate balance the UK must navigate in its recovery efforts. The implications of these figures resonate far beyond mere statistics; they will influence policy decisions, consumer confidence, and the overall health of the economy in the months to come.
