The United Kingdom economy ended 2025 with very slow growth. The final quarter showed only a 0.1% increase. This matched the growth rate from the previous quarter. For the full year 2025, the economy grew by 1.3%. This performance fell slightly short of expectations. It also lagged behind the eurozone’s growth. Several key sectors showed weakness. The dominant services sector saw no growth. Business investment also dropped sharply. This news is trending in United Kingdom business circles.
Services Sector Stagnates
Services output remained flat in the final three months of 2025. This marks a worrying trend for the UK economy. The services sector is the largest contributor to GDP. Its lack of growth acts as a significant drag. Consumer-facing services saw a small rise of 0.2%. However, business-facing services showed no growth. This stagnation contrasts with earlier positive growth. It signals underlying weakness.
Production Shows Resilience
The production sector offered a bright spot. It grew by 1.2% in the fourth quarter. Manufacturing output saw a 0.9% increase. This growth helped offset weaknesses elsewhere. Production growth is the first annual increase since 2021. Electricity and gas supply also contributed positively. This sector’s performance provided some much-needed momentum.
Construction Sector Contracts
Construction output faced a significant downturn. It fell by 2.1% in the final quarter of 2025. This marks the worst performance for the sector in over four years. New housing and private commercial work declined. This contraction pulled down overall economic activity. The sector’s struggles highlight broader economic headwinds.
Business Investment Plummets
Business investment experienced a sharp decline. It fell by 2.7% in the last quarter of 2025. This was the steepest drop seen since early 2021. Several factors contributed to this downturn. Uncertainty surrounding economic policies played a role. Global economic instability also affected confidence. The automotive sector’s output was volatile. This reflected broader business caution.
Cyberattack’s Ripple Effect
A major cyberattack on Jaguar Land Rover (JLR) significantly impacted car production. The incident in September 2025 halted global operations. It disrupted supply chains for weeks. This event alone contributed to the sharp fall in business investment. The automotive sector faced its toughest year in a generation. This cyberattack underscored the risks to critical industries.
Monetary Policy and Inflation Outlook
Inflation remained a persistent challenge. It was 3.4% in December 2025. This level is above the Bank of England’s 2% target. The Bank of England has kept interest rates at 3.75%. However, markets anticipate rate cuts in 2026. Analysts expect cuts in spring and summer. These are aimed at stimulating economic activity. Policymakers are balancing inflation risks. They also monitor weak domestic demand.
Looking Ahead to 2026
The outlook for the United Kingdom economy in 2026 is for modest growth. Forecasts suggest around 1.0% to 1.3% expansion. Businesses express cautious optimism. However, uncertainty persists. The services sector’s stagnation remains a key concern. Construction is expected to see future growth. The automotive sector anticipates recovery. Falling inflation and potential interest rate cuts could boost consumer spending. United Kingdom businesses will closely watch these trends. This economic news is developing daily.
