The latest figures from the Office for National Statistics show the UK economy grew by 0.1 percent in the final quarter of 2025.

That leaves annual growth at 1.3 percent for the year as a whole, slightly higher than 2024 but below the Bank of England’s earlier forecast of 1.4 percent.

The detail behind the figures shows an uneven picture.

The services sector, which represents the largest part of the UK economy, recorded no growth in the final quarter for the first time in over two years. Within that, professional, scientific and technical activities declined by 1.1 percent.

Construction fell by 2.1 percent over the quarter, its weakest performance in four years, reflecting a drop in both repair and maintenance work and new projects starting on site.

Manufacturing provided the main support to growth, helped in part by Jaguar Land Rover restarting production following a cyber-attack earlier in the year. Travel agencies, tour operators and administrative support services also performed strongly.

Business conditions remain mixed

The Bank of England recently lowered its forecast for UK growth in 2026 to 0.9 percent and raised its expectation for unemployment. While some economists believe the latest data could support an interest rate cut in the coming months, others suggest policymakers may wait for clearer signs that inflation is slowing.

Business groups continue to report concerns about rising costs. Surveys from the British Chambers of Commerce indicate that taxation and inflation remain key issues for firms, with particular focus on increases in employer National Insurance contributions.

What this means for business owners

For many small and medium-sized businesses, the figures reinforce a familiar theme: growth is present, but limited.

In this environment, it is sensible to:

• Keep cash flow forecasts up to date
  
  
• Review pricing and margins carefully
  
  
• Factor employer National Insurance changes into staffing decisions
  
  
• Monitor borrowing costs in case of future interest rate movements

How we can help

If you would like to review how the current economic outlook could affect your business, we would be more than happy to talk. Call us on 01904 787 973 or book a call with our team.