The UK economy expanded by 0.1% in the final three months of last year, according to official data, despite signs that tax speculation around Rachel Reeves’s budget had dampened spending.
Figures from the Office for National Statistics show that the economy picked up a little in the fourth quarter, increasing from a rate of 0.1% growth in the previous three months. Economists had been expecting a rise of 0.2%.
The economy grew by 1.3% in 2025, an improvement on growth of 1.1% in 2024. The ONS said it grew by 0.1% on a monthly basis in December, slowing from 0.2% in November.
The rise came despite consumer and business surveys suggesting economic activity had slowed in the run-up to the late November budget, as households held off spending and companies delayed investment decisions amid speculation that the chancellor would implement significant tax rises.
The data is a fillip for Reeves, who hopes an economic turnaround will help Labour’s fortunes.
The UK economy fared relatively well in the first half of 2025, with growth of 0.7% in the first quarter and 0.3% in the second quarter. However, economic output was then hit by the cyber-attack on Britain’s biggest carmaker, Jaguar Land Rover, which depressed vehicle production and led to the minimal growth in the third quarter.
The Office for Budget Responsibility had forecast GDP growth to be 1.5% in 2025 and 1.4% in 2026. The government’s official forecaster expects the economy to grow at annual pace of 1.5% up to 2030, partly because of low productivity growth.
Bank of England policymakers left interest rates unchanged at 3.75% last week but indicated that lower inflation as a result of cost of living measures in Reeves’s budget should pave the way for cuts in the months ahead.
