ONS: UK Economy Grows Below Expectations
The UK economy closed the fourth quarter at a slower-than-expected pace, reinforcing signs that the recovery momentum remains fragile. Office for National Statistics (ONS) data released on Thursday (February 12th) showed UK GDP rose 0.1% (q/q) in the fourth quarter, lower than the consensus estimate of 0.2%, after also growing only 0.1% in the previous quarter. Month-on-month, the economy grew only 0.1% in December, and the pound weakened following the data.
The performance in the final quarter of 2025 was considered disappointing due to uneven growth. Activity in the services sector—the backbone of the UK economy—tended to stagnate, while construction weakened sharply. A slight dampener on the contraction came from industry, which improved as output recovered from disruptions that had previously pressured production, including in the automotive manufacturing supply chain.
The biggest highlight was business investment, which fell 2.7%, the steepest decline since 2021. This weakening investment indicates that businesses are still "holding their breath" amid a combination of risks: tax adjustments, global trade uncertainty, and a less-than-smooth cost climate. Spending on transportation equipment is said to be one of the most pressing components.
Politically, the weak growth figures add to the pressure on Keir Starmer's government, which is being tested by domestic issues and the sensitive issue of the cost of living. This situation narrows the policy room for maneuver: the government needs to demonstrate economic results, but at the same time, businesses and consumers are still calculating before making major decisions.
Even so, the UK economy could still grow 1.3% annually in 2025, exceeding estimates from about a year ago. There have also been signs of improvement in several recent sentiment surveys. However, the outlook remains challenging as the market waits to see whether consumption and investment can rebound without triggering new price pressures.
Going forward, market attention will be on how the Bank of England interprets the combination of slow growth and inflation dynamics. With "slim" growth at the end of the year, the prevailing narrative is that the UK is still moving forward, but the pace isn't yet fast enough to provide security for businesses and households.
Source: Newsmaker.id
