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The
Office for National Statistics said the British economy, the
world's sixth-largest by many measures, expanded by only 0.1% on
a quarterly basis, the same rate as that recorded in the third
quarter.
The economy grew by 1.3% over the year as a whole, up from 1.1%
the previous year. It's the highest annual level of growth since
2022.
Economists said uncertainty ahead of the Labour government's
budget in late November meant businesses and consumers took a
wait-and-see approach.
For much of the period, there had been expectations that
Treasury chief Rachel Reeves would break key promises not to
raise income tax levels. In the end, the tax rises were far more
modest than anticipated.
“The underwhelming final quarter caps off another disheartening
year for the U.K. economy with growth tailing off unnervingly
quickly after the strong start to 2025, as rising taxes,
heightened uncertainty and poor productivity increasingly
squeezed activity,” said Suren Thiru, economics director at
accounting body ICAEW.
Some recent economic indicators have pointed to a pickup in
growth in the early part of 2026. However, growth is not
expected to rise dramatically over the full year. Last week, the
Bank of England cut its growth forecasts for the next two years,
from 1.2% to 0.9% for 2026, and from 1.6% to 1.5% for 2027.
Britain’s Labour government, which has lost significant support
since it won the general election in 2024 partly because of the
economy, is hoping that with growth tepid and with inflation
expected to fall sharply this year, the Bank of England will cut
its main interest rate by a further quarter of a percentage
point in March to 3.50%. Last week, the bank kept it unchanged
at 3.75%.
“The task for 2026 is for the government to double down on its
growth agenda to build a sustained economic recovery that will
eventually flow into people’s pay packets," said Simon Pittaway,
senior economist at the think tank Resolution Foundation.
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