UK economy grew 1.4 per cent in 2025

The UK economy grew 1.4 per cent in 2025, official data has shown as data analysts nudged up the estimate for the year.

The Office for National Statistics has confirmed that the UK economy grew more than originally thought but growth slowed down radically as the year passed.

It found that GDP increased by 0.1 per cent in the last quarter of the year, an unrevised figure on a previous estimate. The full-year growth was previously estimated at 1.3 per cent.

This compared to a surge of 0.7 per cent in the first quarter of the year before President Trump’s Liberation Day. The UK economy grew by 0.2 per cent and 0.1 per cent in the subsequent quarters.

GDP per capita is thought to have decreased by 0.1 per cent in the last quarter but it increased by 1.1 per cent on the year.

Business investment over the year was two per cent higher, with a fall of 2.5 per cent in the fourth quarter dragging down on the figure.

And real household disposable income expanded by 1.2 per cent in the last quarter, driven by an increase in wages and salaries.

But top economists are rushing to warn that the picture is less rosy this year as economists at the International Monetary Fund said the UK was “especially exposed” to higher gas prices.

Quilter investment manager Jonathan Raymond said the latest ONS figures represented “an economy stuck in stagnation”.

“After a promising start to the year, momentum faded as businesses paused investment in response to tax changes and households grew increasingly cautious about what comes next,” Raymond said.

“Growth was already fragile, and while there were tentative signs of life at the start of the year, the latest bout of geopolitical turmoil has quickly snuffed them out.”

Labour government officials had been keen to stress that the UK economy was set to turn a corner in 2026 amid hopes of inflation easing, interest rates being cut and planning deregulation coming into effect.

Those plans have now been scuppered as President Trump and Prime Minister Netanyahu’s war with the Iranian regime could lead to global fuel shortages, push up prices to levels not seen since Russia launched its full-scale invasion of Ukraine and a drop in growth.

A Treasury spokesperson said: “In an uncertain world we have the right economic plan. The decisions we have taken have put us in a better position to protect the country’s finances and family finances from global instability.

“We were the fastest growing European economy in the G7 last year and now we’re going even further by using regional growth, AI and a closer relationship with the EU to get our economy growing.”

UK economy’s worrying outlook

City analysts have rushed to revise down their growth forecasts for the UK economy this year.

The OECD warned last week the UK would face the biggest hit from trade disruption in the Middle East as growth could come to 0.7 per cent.

Economists at Panmure Liberum and Oxford Economics have said that a longer war could lead to a contraction in the UK.

Capital Economics’ chief UK economist Paul Dales said there could be a “mild recession” this year.

“The confirmation that real GDP grew by just 0.1 per cent in the fourth quarter of last year is a reminder that the economic backdrop is much weaker now than the last time energy prices surged in 2022,” Dales said.

While consumers have so far seen their household bills left unchanged due to the energy price cap being frozen in until July, businesses have suffered from soaring oil and gas prices.

UK gas prices have risen by more than 70 per cent since the start of the war while the Brent Crude Oil benchmark surpassed $115 per barrel.

The surge in energy prices and wider economic threat posed by the war will have unnerved Rachel Reeves and Keir Starmer, who is holding an emergency Cobra meeting with senior government officials later on Tuesday.

Starmer has stuck to his message that the UK “did not join the war” and initially refused Trump access to its military bases in the region while Reeves has indicated that any energy support scheme for Britons will be “targeted”.

The main political parties have now launched campaigns ahead of crucial local elections in May, which could heap pressure on the Prime Minister as he faces a battle to mitigate both economic and political risks over the coming months.