The latest forecasts for the UK economy suggest a slight increase in growth during the final quarter of 2025, as economists project a further 0.1% rise in GDP. This follows a similar growth rate in the previous quarter, indicating a period of stagnation yet resilience amidst ongoing uncertainties surrounding the national budget. The Office for National Statistics (ONS) is set to release these vital figures on Thursday.
Economic Indicators Point to Cautious Optimism
Predictions from various economists show a consensus that the UK economy grew by 0.1% in the last quarter of 2025. This follows an identical growth rate recorded in the third quarter of the year. However, there is a silver lining, as some analysts propose that the growth rate might even rise slightly above expectations owing to stronger-than-anticipated activity levels in November.
Recent data from the ONS revealed a mixed economic picture: after a contraction of 0.1% in October, a rebound of 0.3% was noted in November, primarily driven by a resurgence in manufacturing, particularly at Jaguar Land Rover following a significant cyber incident. Nevertheless, forecasts for December indicate stagnation, with Pantheon Macroeconomics predicting no growth for that month.
Industry surveys, particularly the construction sector’s Purchasing Managers’ Index (PMI), have also indicated a challenging environment, highlighting a continued downturn in housing and commercial construction. However, some analysts argue that renewed fiscal clarity post-budget could stimulate a modest uptick in consumer spending.
Budget Clarity and Consumer Spending
Victoria Scholar, head of investment at Interactive Investor, opines that economic activity may have experienced a boost following the autumn budget, alleviating previous uncertainties. She notes, “It is likely that economic activity picked up after the budget once that cloud of uncertainty shifted to the rearview mirror in December.”
This sentiment is echoed by Robert Wood, chief UK economist at Pantheon Macroeconomics, who suggests that while he maintains his growth forecast at 0.1%, signs from service sector activity point to a potential increase to 0.2%.
Investec’s projections reflect a similar outlook, estimating 0.2% growth for December and the fourth quarter collectively, which would translate into an annual growth rate of 1.4%, a slight improvement from the previous year’s 1.1%. Sandra Horsfield from Investec Economics remarked, “The big picture is that the UK economy had defied the gloomy popular narrative and outperformed expectations during 2025.”
Future Growth Projections Remain Cautious
Despite these encouraging signs, the broader economic outlook remains muted. The Bank of England recently revised its growth estimate for 2025 down to 1.4%, from an earlier prediction of 1.5%. Furthermore, it has cut its forecasts for 2026 and 2027, now predicting growth rates of 0.9% and 1.5%, respectively.
The resilience demonstrated by the UK’s economy in 2025, particularly through sectors like utilities and potential increases in housebuilding, suggests a capacity for recovery. However, the looming uncertainties surrounding fiscal policy and the global economic environment continue to pose risks to sustained growth.
Why it Matters
Understanding the nuances of the UK’s economic performance is critical not only for policymakers but also for businesses and consumers navigating a complex economic landscape. As the nation grapples with budgetary uncertainties and external pressures, these growth figures will serve as crucial indicators of stability and potential resilience. A modest growth trajectory, if sustained, could bolster consumer confidence and investment, essential components for stimulating broader economic recovery in the years to come.
