UK Economy Shows Modest Growth Amidst Global Challenges
Published 12 February 2026
Highlights
- The UK economy grew by 0.1% in the final quarter of 2025, with an annual growth rate of 1.3%, according to the ONS.
- Chancellor Rachel Reeves claims the UK is the "fastest growing G7 economy in Europe" due to strategic economic decisions.
- The construction industry experienced a significant decline, dropping by 2.1%, while manufacturing saw a 0.9% increase.
- Economic experts express concerns over "subdued growth," with the services sector showing no growth in the final quarter.
- The Bank of England has lowered growth expectations for 2026, citing economic uncertainty and public spending as key factors.
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Rewritten Article
UK Economy Shows Modest Growth Amidst Global Challenges
The UK economy recorded a modest growth of 0.1% in the final quarter of 2025, culminating in an annual increase of 1.3%, according to the latest figures from the Office for National Statistics (ONS). Despite this growth, the economic landscape remains challenging, with experts highlighting a "subdued" performance.
Economic Performance and Government Response
Chancellor Rachel Reeves has emphasized the UK's position as the "fastest growing G7 economy in Europe," attributing this to strategic choices that have led to six interest rate cuts since the last election and a faster-than-expected fall in inflation rates. "The Government has the right economic plan to build a stronger and more secure economy," Reeves stated, underscoring efforts to reduce the cost of living and national debt.
Sectoral Insights: Manufacturing and Construction
The manufacturing sector emerged as a key driver of growth, expanding by 0.9% in the last quarter. However, the construction industry faced a downturn, experiencing its largest fall in over four years with a 2.1% decline. Liz McKeown, director of economic statistics at the ONS, noted that economic uncertainty remains a significant challenge for businesses, though there are "early signs of slightly more positive expectations."
Expert Opinions and Future Outlook
Despite the government's optimistic outlook, economic experts remain cautious. Lindsay James, an investment strategist at Quilter, described the economic picture as "rather bleak," pointing to downward revisions in GDP data and a lackluster performance during the Christmas period. The services sector, previously a major growth contributor, showed no growth in the final quarter.
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Scenario Analysis
Looking ahead, the UK's economic trajectory remains uncertain. The Bank of England has already lowered its growth expectations for 2026, highlighting the need for increased consumer and business confidence. As public spending continues to play a pivotal role, the government faces the challenge of fostering an environment conducive to investment and growth. Experts suggest that addressing economic uncertainty and boosting consumer confidence will be critical in reversing the current trend of subdued growth.
The UK economy recorded a modest growth of 0.1% in the final quarter of 2025, culminating in an annual increase of 1.3%, according to the latest figures from the Office for National Statistics (ONS). Despite this growth, the economic landscape remains challenging, with experts highlighting a "subdued" performance.
Economic Performance and Government Response
Chancellor Rachel Reeves has emphasized the UK's position as the "fastest growing G7 economy in Europe," attributing this to strategic choices that have led to six interest rate cuts since the last election and a faster-than-expected fall in inflation rates. "The Government has the right economic plan to build a stronger and more secure economy," Reeves stated, underscoring efforts to reduce the cost of living and national debt.
Sectoral Insights: Manufacturing and Construction
The manufacturing sector emerged as a key driver of growth, expanding by 0.9% in the last quarter. However, the construction industry faced a downturn, experiencing its largest fall in over four years with a 2.1% decline. Liz McKeown, director of economic statistics at the ONS, noted that economic uncertainty remains a significant challenge for businesses, though there are "early signs of slightly more positive expectations."
Expert Opinions and Future Outlook
Despite the government's optimistic outlook, economic experts remain cautious. Lindsay James, an investment strategist at Quilter, described the economic picture as "rather bleak," pointing to downward revisions in GDP data and a lackluster performance during the Christmas period. The services sector, previously a major growth contributor, showed no growth in the final quarter.
What this might mean
Looking ahead, the UK's economic trajectory remains uncertain. The Bank of England has already lowered its growth expectations for 2026, highlighting the need for increased consumer and business confidence. As public spending continues to play a pivotal role, the government faces the challenge of fostering an environment conducive to investment and growth. Experts suggest that addressing economic uncertainty and boosting consumer confidence will be critical in reversing the current trend of subdued growth.
