United Kingdom, growth slows in the fourth quarter: investment down and services stagnant

The British economy ended 2025 with the brakes on. In the fourth quarter, GDP grew by just 0.1%, below the 0.2% forecast by analysts, following a similar increase in the third quarter. December also recorded a modest +0.1%, while the pound remained weak after the release of the data from the Office for National Statistics (ONS).

Activity was supported mainly by public spending, which rose by 0.4%, while private demand showed clear signs of fragility. Household consumption increased by only 0.2%, and business investment fell by 2.7%, the sharpest decline since 2021, partly due to lower spending on transport equipment. “The private sector remains extremely weak,” noted Ruth Gregory of Capital Economics.

The manufacturing sector posted a 0.9% rebound, driven by the recovery in car production after the cyberattack that had hit Jaguar Land Rover. In contrast, construction contracted by 2.1%, while net trade subtracted from growth due to a widening deficit. Services, the backbone of the British economy, showed no expansion for the first time since the end of 2023, also held back by strikes in the healthcare sector.

On an annual basis, GDP grew by 1.3%, better than the 1.1% recorded in 2024 and above the expectations formulated a year earlier, confirming the United Kingdom as the most dynamic European economy in the G7. However, growth was uneven: strong in the first half of the year, significantly weaker in the second.

The outlook remains cautious. The Bank of England has revised its 2026 growth forecast down to 0.9% and expects unemployment to rise more than previously anticipated. Markets are pricing in at least one further rate cut in 2026, with a high probability of a second move. For the Starmer government, the challenge now is to revive investment and confidence in a context still marked by domestic and external uncertainties.

Andrea Pelucchi