In 2025, the UK economy grew only by 0.1%, falling short of expectations and putting pressure on policymakers. Despite being one of the strongest performers in the G7, the struggle for sustainable growth persists, especially in the services and construction sectors. The slow growth may prompt the Bank of England to consider rate cuts to boost the economy.

The Office for National Statistics reported that UK GDP grew by 1.3% in 2025, slightly below expectations. The growth was influenced by a 2.1% contraction in the construction sector and stagnant growth in the services sector. Higher taxation from recent budgets has also impacted businesses and voters. These figures are expected to further push the Bank of England towards rate cuts.

The UK’s services sector played a significant role in GDP growth, with some subsectors showing positive growth. However, overall services output fell to 0%, impacting the economy. Labor market data is crucial in shaping the Bank of England’s monetary policy decisions, with expectations for rate cuts in 2026. The latest GDP data will likely support further rate cuts to stimulate economic growth.

The Bank of England’s forecast for UK growth in 2026 predicts a slight increase to 0.2% in the first quarter. However, subdued growth is expected throughout the year due to weak confidence and global demand. Consultancy firm EY projects modest GDP growth of 0.9% in 2026, citing global uncertainty and tariff disruption as key factors.

Read more at Morningstar: UK Economy Grew 0.1% in Q4, Below Forecasts