The UK economy expanded only marginally in the fourth quarter as tax hike concerns ahead of the Autumn Budget dampened activity, data from the Office for National Statistics revealed on Thursday.
Gross domestic product grew 0.1 percent on a quarterly basis, the same slow pace of increase as seen in the third quarter. Moreover, this was slightly weaker than the forecast of 0.2 percent.
On an annual basis, GDP was up 1.0 percent in the fourth quarter compared to economists’ forecast of 1.2 percent.
Growth in the latest quarter was driven by an increase of 1.2 percent in production, while the construction sector fell 2.1 percent and the services sector showed no growth.
On the expenditure-side, growth in household consumption halved to 0.2 percent from 0.4 percent in the third quarter. Government spending advanced 0.4 percent, reflecting increase in health, public administration and defence, and social care.
Meanwhile, gross fixed capital formation fell 0.1 percent as business investment plunged 2.7 percent, reversing the 1.6 percent rise in the third quarter.
The trade deficit for goods and services was estimated at 2.0 percent of nominal GDP in the fourth quarter, the ONS said.
British Chambers of Commerce Head of Research David Bharier said the quarterly data paints a subdued picture. Flat services, the sharp fall in construction and the decline in business investment in the fourth quarter points to weak momentum going into 2026 and underlines the persistent low growth trap the UK faces.
“A softer-than-expected end to last year comes as little surprise given the pressures many businesses experienced throughout the year: uneven demand, rising costs and persistent uncertainty that led key hiring and investment decisions to be deferred,” Confederation of British Industry Senior Lead Economist Ben Jones said.
In 2025, the economy grew 1.3 percent, rising from a growth of 1.1 percent in 2024, the ONS reported.
Further, data showed that in December alone, GDP edged up 0.1 percent month-on-month following the 0.2 percent rise in November. This rate matched expectations.
Another report from the ONS revealed that the visible trade deficit narrowed to GBP 22.7 billion in December from GBP 23.6 billion in the previous month.
Meanwhile, the trade in services resulted in a surplus of GBP 18.4 billion, which was slightly above November’s surplus of GBP 18.02 billion.
As a result, the total trade gap came in at GBP 4.3 billion versus a GBP 5.6 billion deficit a month ago.
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