The UK economy grew by 0.1% in the third quarter of 2025 compared to the previous three months, according to latest data, with annual growth steady at 1.3%. This marks a continuation of moderate expansion, though quarterly momentum has slowed from earlier in the year. Over the past six quarters, GDP growth has gradually decelerated from a high of 1.9% in Q1 2024, reflecting persistent headwinds including elevated inflation and tight monetary policy. Despite the sluggish quarter-on-quarter performance, the stable year-on-year rate suggests underlying resilience in the broader economy.
On the production side, sectoral data reveals a mixed picture. The services sector, which accounts for the largest share of economic output, expanded by 1.5% year-on-year, underpinning much of the overall growth. Construction outperformed with a strong 2.2% increase, likely supported by public infrastructure projects and modest improvements in housing activity. In contrast, industrial production contracted by 0.2%, signaling ongoing challenges in manufacturing and energy-intensive industries, possibly due to global demand softness and domestic cost pressures.
Examining expenditure components, investment emerged as a key growth driver, rising 2.9% compared to the same quarter last year. This uptick may reflect business confidence returning in select areas, particularly in technology and green energy initiatives. Government spending also contributed positively, growing by 1.6%, indicating continued fiscal support across health, education, and defense. Meanwhile, household consumption increased by 0.7%, suggesting consumers remain cautious amid still-elevated living costs. While retail and leisure spending showed some improvement, spending on big-ticket items remained subdued, pointing to constrained disposable incomes and elevated debt servicing costs.
Overall, the UK’s economic expansion remains anchored in services and public-sector-led demand, while weak production and tepid quarterly growth highlight structural vulnerabilities. The divergence between strong annual investment growth and sluggish quarterly GDP underscores the uneven nature of the recovery. Policymakers will be watching inflation and labor market trends closely, as further interest rate decisions hinge on whether this modest growth can be sustained without reigniting price pressures. With external risks mounting, including global trade tensions and energy volatility, the path to stronger, broad-based growth remains uncertain.