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UK GDP grows 0.1% in Q3 2025, the slowest expansion in over five years

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  Published in Business and Finance on Thursday, November 13th 2025 at 5:58 GMT by reuters.com

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UK Economy Grows at 0.1% in Q3 2025, but Growth Has Slowed Dramatically

On 13 November 2025 the Office for National Statistics (ONS) released its latest data on the United Kingdom’s gross domestic product (GDP). The country’s economy grew by only 0.1 % in the third quarter of 2025, the slowest pace of expansion in more than five years, and its 12‑month rate of growth slowed to 1.2 % from 1.4 % in the previous quarter. Although the figures still indicate that the UK is not in recession, the steep slowdown has raised concerns among policymakers and market participants about the resilience of the post‑pandemic recovery.

1. The Numbers in Context

The Q3 growth rate of 0.1 % is a sharp contrast to the 0.6 % rise reported for Q2 2025, when the economy added almost £10 billion to GDP. Over the same period, the UK’s growth slowed from 0.8 % in Q3 2024 to 0.1 % in Q3 2025, while the 12‑month (annualised) growth fell from 1.5 % to 1.2 %. The data were released on 13 November, a date that the ONS had warned would be “one of the toughest releases” of the year because the slowdown could affect the Bank of England’s policy decisions and the government's fiscal stance.

The ONS’s quarterly GDP estimate was revised downwards from an earlier 0.4 % projection made on 5 November. The revision was driven largely by weaker consumer spending and a decline in investment, while the service sector, which accounts for roughly 70 % of GDP, showed a modest 0.3 % growth compared with a 0.6 % rise in the previous quarter.

2. Why the Economy Is Slowing

a. Consumer Spending Falls

The biggest drag on growth was a decline in household consumption. The ONS data show that retail sales fell by 0.3 % in Q3, the first contraction in consumer spending in any of the last 12 quarters. The fall was driven by a slump in discretionary spending on leisure, travel and hospitality, as well as weaker sales in retail shops. Prices continue to climb, but the inflation slowdown that the ONS reported (see linked Reuters article on 5 November “UK inflation falls to 4.7 %”) has not yet translated into greater purchasing power for consumers.

b. Investment Is Stalled

Business investment growth stalled in Q3, falling to –0.2 % from a modest 0.3 % gain in Q2. This downturn reflects heightened uncertainty over future demand, higher borrowing costs, and supply‑chain constraints that have lingered since the pandemic. Corporate earnings remain under pressure, and many firms are holding back on capital expenditure until the macro‑environment stabilises.

c. Public Sector Growth Slows

Public‑sector spending, which contributed 2.1 % to GDP in Q3, increased at a slower pace than in Q2. This slowdown is linked to a modest deceleration in government borrowing and the pace of new fiscal initiatives. The ONS notes that the Treasury’s “budget‑constrained fiscal stance” means that any future stimulus will need to be carefully targeted.

d. Housing Market Weakness

Housing activity, a traditional growth catalyst, slowed markedly. Construction spending fell by 0.5 %, while home sales declined by 0.4 % in Q3. The downturn is largely a result of higher mortgage rates and a tightening of the credit market, which has dampened demand for both new homes and remortgaging.

3. Inflation and Wage Dynamics

The Q3 inflation picture remains a mixed bag. While headline inflation slipped to 4.7 % year‑on‑year in September (the most recent CPI reading before the GDP release), core inflation – which strips out volatile food and energy prices – remains at 4.2 %. The ONS points out that wages are still growing, albeit slowly, at 3.2 % y/y, a figure that lags behind the 4.5 % growth in the Consumer Price Index (CPI). The wage‑inflation gap therefore remains a concern for the Bank of England, which is expected to keep its policy rate at 5.25 % until the end of 2025.

The linked Reuters piece “UK inflation falls to 4.7 %” provides a deeper dive into how energy prices have moderated and the role of the government’s energy‑price cap. In Q3, the ONS noted that the average price of gasoline dropped by 4.3 % and heating oil fell by 7.8 %, giving households some relief from the cost of living crisis.

4. Policy Implications

a. Bank of England

The Bank of England’s Monetary Policy Committee (MPC) is likely to view the subdued growth as a sign that the economy remains fragile. While the MPC is cautious about raising rates further, it remains on alert to rising inflation, especially if wage growth accelerates. The Bank’s latest statement (released on 12 November) stresses that it will monitor “any new data that might indicate an acceleration of inflationary pressures.”

b. Government Fiscal Strategy

The UK Treasury’s current fiscal position is still tight, with public debt approaching 95 % of GDP. The ONS notes that the fiscal deficit has contracted slightly from 3.2 % of GDP in Q2 to 3.1 % in Q3. However, the Treasury will likely keep the 2 % fiscal support for businesses as outlined in the “Business Resilience Fund,” a move that could help prevent a sharper contraction in investment.

5. Comparisons with Other Economies

The UK’s Q3 2025 growth figure sits in the lower end of the spectrum for G7 economies. In contrast, Germany grew 0.8 % in the same quarter, while France added 0.6 %. Emerging markets such as India and Brazil are also posting higher growth rates, although those economies face their own inflationary and supply‑chain challenges. The UK’s slowdown thus places it under pressure to maintain competitiveness while managing domestic cost pressures.

6. Outlook

Analysts predict that growth could remain modest in the short term. A report from the Institute for Fiscal Studies (IFS) suggests that GDP growth may stay below 0.5 % for the next two quarters if the inflationary tailwind persists. However, if the Bank of England cuts rates in the coming months and the government launches targeted fiscal stimulus, there could be a modest uptick in consumption and investment. The ONS’s next GDP release, scheduled for 12 January 2026, will be crucial in confirming whether the economy is truly decelerating or simply moderating in line with expectations.

7. Key Takeaways

8. Conclusion

The UK’s economy grew, but the pace of expansion has slowed sharply, reflecting the cumulative impact of high inflation, subdued consumer confidence, and restrained investment. While the country is not in recession, the data underline the fragility of the recovery and the challenges that lie ahead for the Bank of England and the Treasury. Market watchers will be looking closely at the next GDP release and the Bank’s policy statements to gauge whether a more robust stimulus or further tightening is needed to keep the UK on a stable growth trajectory.