Britain’s economy ended 2025 on a lacklustre note, not that it was a huge surprise. The economy grew by 0.1% in the final quarter and 1.3% overall last year.
What’s particularly eye-catching from the release is just how weak business investment (-2.7%) and construction (-2.1%) came in during the final few months of the year. The former will have been heavily influenced by volatile car production, linked to a major cyberattack at the tail-end of the third quarter, even if it’s tempting to blame it on the wider uncertainty in the run-up to the Budget and the weakness in business confidence.
The weakness in construction is a reminder that past Bank of England rate hikes are still biting. The average interest rate on outstanding mortgage debt is still rising, not least given the jump in mortgage refinancing expected over the next few months.
That being said, we have to take the latest GDP figures with at least a pinch of salt. Growth has become suspiciously seasonal. The first half of the year has looked much stronger than the second every year since 2022. Though hard to pin down, we suspect it’s partly down to higher inflation, the prevalence of price hikes early on in the year, which are not being fully adjusted for in the deflator/seasonal adjustment process somewhere along the line. There’s no reason to think this trend will stop in 2026, and if for no other reason, we suspect we’ll get a bit of a bounce back in Q1 GDP.