UK economy grows by 0.1% despite uncertainty over Reeves's budget

"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 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."

UK GDP rose 0.1% in the fourth quarter, taking annual growth to 1.3% in 2025 compared with 1.1% in 2024. Monthly output increased 0.1% in December after 0.2% in November. Economists had forecast 0.2% quarterly growth. Consumer and business surveys indicated activity slowed before the late November budget as households postponed spending and firms delayed investment amid tax-rise speculation. Output was stronger in the first half of 2025 but was hit by a cyber-attack on Jaguar Land Rover, depressing vehicle production and contributing to minimal third-quarter growth. The OBR had forecast 1.5% growth for 2025, and the Bank of England kept rates at 3.75% while signalling possible cuts ahead.

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