United Kingdom: Economic growth is muted in the fourth quarter of 2025
GDP reading: The United Kingdom’s GDP increased 0.1% in seasonally adjusted quarter-on-quarter terms in Q4, unchanged from the prior quarter’s reading and slightly below market expectations. Q4’s reading was the weakest since Q4 2023. As such, the economy continued the pattern present since 2022 of a strong first half of the year followed by a weaker H2—a pattern indicative of possible problems in the seasonal adjustment of the data series.
Drivers: Relative to the prior quarter’s data, figures in Q4 improved for government consumption (+0.4% in seasonally adjusted quarter-on-quarter terms vs +0.3% in Q3) and imports of goods and services (+0.8% vs +0.5% in Q3). In contrast, readings worsened for private consumption (+0.1% vs +0.4% in Q3), fixed investment (-0.1% vs +1.1% in Q3) and exports of goods and services (-0.6% vs +0.2% in Q3).
On a year-on-year basis, the economy expanded 1.0% in Q4, following 1.2% growth in the prior quarter.
Panelist insight: On the Q1 outlook, ING’s James Smith said:
“Growth has become suspiciously seasonal. The first half of the year has looked much stronger than the second every year since 2022. Though hard to pin down, we suspect it’s partly down to higher inflation, the prevalence of price hikes early on in the year, which are not being fully adjusted for in the deflator/seasonal adjustment process somewhere along the line. There’s no reason to think this trend will stop in 2026, and if for no other reason, we suspect we’ll get a bit of a bounce back in Q1 GDP.”
On the outlook for this year as a whole, EIU analysts said:
“Tax rises in the autumn budget in November will exacerbate already dampened business sentiment and job creation. Spending will mostly go towards improving public services rather than growth-enhancing investment, with major investment projects unlikely to start to bear fruit until later in our forecast period. Higher energy utility costs are exerting some upward pressure on prices, liming the pace of disinflation and therefore curbing the boost to consumer spending from easing monetary policy.”