UK economy stalls at 0.1% amid weak investment

Published: 12 February 2026. The English Chronicle Desk. The English Chronicle Online.

The UK economy growth slowed to 0.1% in the final quarter of 2025, reflecting weaker business investment and low consumer confidence. Early data from the Office for National Statistics (ONS) indicate that economic growth remained stagnant compared with the previous quarter, falling short of economists’ expectations of a 0.2% rise. This limited growth underscores how the UK economy is struggling to regain momentum as businesses hold back spending and households remain cautious amid ongoing economic uncertainty.

Annual figures show the UK economy grew by 1.3% in 2025, up from 1.1% in 2024 but below the 1.5% forecast, demonstrating persistent underlying weakness in growth drivers. The ONS reported that monthly output in December increased by just 0.1%, down from 0.2% in November after revisions, signaling slowing momentum heading into 2026. Analysts point out that this lack of growth in the services sector, which represents roughly 80% of the economy, highlights structural challenges in maintaining sustained expansion.

Manufacturing, rather than services, provided the primary boost in the final quarter, rising 1.2% as production recovered from earlier disruptions. Construction, conversely, declined sharply by 2.1%, marking its weakest quarterly performance in four years, and illustrating persistent headwinds in investment-heavy industries. Liz McKeown, director of economic statistics at the ONS, emphasized that growth remained minimal, with services stagnating while manufacturing provided the limited gains observed in the quarter.

Business investment fell 2.7% during the last three months of the year, while consumer spending increased only 0.2%, according to ONS estimates. Surveys conducted before the late November budget indicated that households were hesitant to spend and companies delayed investments in anticipation of potential tax changes, reinforcing the picture of subdued economic activity. Ruth Gregory, deputy chief UK economist at Capital Economics, noted that private sector activity appeared particularly restrained as the year ended.

The first half of 2025 had offered stronger momentum, with 0.7% growth in the first quarter and 0.3% in the second. Yet a significant cyber-attack on Jaguar Land Rover disrupted vehicle production in the third quarter, contributing to near-zero growth. The uncertainty surrounding the autumn budget further constrained business decisions and investment in the final quarter, dampening overall economic performance. Suren Thiru, economics director at the Institute of Chartered Accountants in England and Wales, described the results as “a whimper” ending the year, highlighting the negative impact of uncertainty and rising operational costs on trade.

Despite these setbacks, early surveys from January 2026 suggest that sentiment among businesses and consumers is improving, with economists projecting a 0.4% growth rate in the first quarter of this year. Fergus Jimenez-England, associate economist at the National Institute of Economic and Social Research, urged policymakers to avoid actions that could destabilize confidence, particularly ahead of the upcoming spring statement in March.

The Office for Budget Responsibility initially forecast GDP growth at 1.5% in 2025 and 1.4% in 2026, reflecting the UK economy’s slower pace. Long-term projections anticipate steady annual growth around 1.5% through 2030, driven in part by low productivity improvements. Bank of England officials recently left interest rates at 3.75% while noting that declining inflation, aided by cost-of-living measures introduced in Chancellor Reeves’s budget, could allow for future rate cuts.

Chancellor Reeves emphasized Labour’s economic strategy, insisting that careful management can boost growth while controlling debt. “Our plan prioritizes economic security and investment across every region, addressing cost-of-living pressures while creating opportunities for sustainable growth,” Reeves stated. Economists suggest that the government’s ability to maintain stability in policy will be critical to reversing the UK economy’s slowed trajectory and encouraging investment confidence.

The UK economy’s reliance on manufacturing and the volatility of consumer sentiment reveal persistent vulnerabilities, despite moderate annual growth. Analysts warn that without targeted policies supporting private sector activity and investment, future growth could remain uneven, and quarterly fluctuations may continue to reflect uncertainty rather than underlying economic strength.
Economic commentators observe that while growth prospects for 2026 appear cautiously positive, the UK economy faces structural challenges in construction and services sectors, limiting overall expansion. Investment in innovation, infrastructure, and labour productivity may prove crucial to supporting stronger growth in subsequent quarters, as businesses seek stability following a period of cautious spending.

Overall, the UK economy ended 2025 with minimal growth, demonstrating the persistent tension between policy uncertainty and the need for investment-led recovery. Analysts expect that careful fiscal management and supportive monetary measures could help stimulate both business confidence and consumer spending, fostering a more resilient economic trajectory in 2026 and beyond.

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