The UK’s Gross Domestic Product growth amounted to 0.1% during Q4 2025, according to figures published today (31 March) by the Office for National Statistics. This marks no change in the rate of growth compared to the previous quarter.
Production increased by 1.2% between October and the end of December last year. However, this was countered by a 2% fall in growth within the construction sector, while services remained stagnant.
On an annual basis, UK GDP grew by 1.4%, according to ONS estimates, which marks a 10 basis-point increase from the 1.3% rise seen in 2024.
While real GDP per head increased by 1.1% throughout the whole of last year – compared to no growth at all in 2024 – this dipped by 0.1% during Q4. This is still an improvement on Q4 2024, where real GDP-per-head data came in at a 0.5% decrease.
The data comes one week after the Organisation of Economic Co-operation and Development (OECD) downgraded the UK’s growth forecast from 1.2% to 0.7%, following energy spikes caused by the Iran war.
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Jonathan Raymond, investment manager at Quilter Cheviot, said the fact the UK’s GDP “limped over the line at the end of 2025 may not come as a surprise”, but demonstrates “just how exposed the economy was entering 2026”.
“Growth was already fragile, and while there were tentative signs of life at the start of the year, the latest bout of geopolitical turmoil has quickly snuffed them out,” he explained.
“The UK has narrowly avoided the recession some feared would have arrived at some point in the past 18 months, but that should not be mistaken for strength. This is an economy stuck in stagnation.
“After a promising start to the year, momentum faded as businesses paused investment in response to tax changes and households grew increasingly cautious about what comes next. Inflation, meanwhile, has remained stubbornly above target, keeping interest rates higher for longer and tightening the squeeze on activity.”
Considering what the next quarter’s data could look like, Raymond warned higher energy prices could reduce the demand for goods and services as inflationary pressures mount.
“It is a timely reminder of how vulnerable the UK economy remains to events beyond its control,” he continued. “For the Bank of England, this presents an uncomfortable trade‑off.
“In normal circumstances, prolonged stagnation would argue for looser policy to support growth. But with inflation likely to rise again, the scope to cut rates is limited.”
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Susannah Streeter, chief investment strategist at Wealth Club, agreed higher energy prices will “pile pressure on producers”, who have already had to contend with “significant increases” over recent years.
“There’s a limit to how much they can delay passing these higher overheads on to consumers,” she warned. “As consumers prepare for higher prices, the Bank of England will be watching inflation expectations closely for signs that they’ll demand higher wages to compensate.
“But with the economy already stagnating before the conflict began, and demand for goods and services so sluggish, the risks of a wage spiral emerging do not at this stage look too severe.
“Nevertheless, financial markets are still pricing in two-to-three rate hikes this year, although much will depend on the duration of the Iran conflict.”
