This sluggish performance, confirmed by the Office for National Statistics (ONS), fell short of the 0.2% growth anticipated by City economists.

The slowdown was primarily driven by a lacklustre performance in the dominant services sector, which failed to grow during the quarter, and a significant 2.1% contraction in construction – the sector’s poorest showing in four years. While production output rose by 1.2%, largely bolstered by manufacturing, overall momentum remained fragile.

Monthly data further highlighted this instability; a downward revision to November’s growth and a contraction in October suggests the economy barely kept its head above water during the autumn. Business investment remained volatile, hampered by a period of intense fiscal uncertainty leading up to the November Budget.

Matt Swannell, chief economic advisor to the EY ITEM Club, said: “overall growth estimates in the second half of the year probably understate the underlying strength of the UK economy.

“In recent years, the economy has regularly lost momentum in the middle of the year, before regathering pace through the turn of the year, indicating that the activity estimates from the Office for National Statistics (ONS) continue to suffer from residual seasonality. Early indications are that growth will pick up in the first quarter of this year, boosted by that residual seasonality.

“Although growth is expected to pick up in Q1, 2026 is likely to be another year of sluggish UK growth. Ongoing uncertainty and weak profitability are likely to weigh on business sentiment and investment spending. Meanwhile, continued fiscal tightening and slowing real income growth will present powerful headwinds to growth.”

Kevin Brown, savings expert at Scottish Friendly, said: “The UK economy managed to carve out another quarter of modest growth at the end of 2025, and annual growth of 1.3% shows it has proved stubbornly resilient.

“Elevated interest rates, sticky inflation, and months of budget-related uncertainty could have been enough to stall activity altogether. Instead, growth has held up, albeit only just.

“There are early signs that once the fog around the Autumn Budget began to clear, parts of the economy regained direction, particularly across the services sector. That was enough to offset ongoing weakness in manufacturing and construction and keep the economy inching forward.

“For savers, if the Bank of England base rate heads lower as anticipated this year, today’s cash interest rates will fall. Relying too heavily on cash risks seeing returns eroded as inflation persists. For those with a longer-term horizon, this is a reminder that investing remains one of the most effective ways to try to protect and grow purchasing power over time, even if the economic backdrop still feels uncertain.”