UK economy grows more than expected but remains ‘fundamentally weak’
The UK economy grew more than expected in November last year but remained “fundamentally weak”, official data has shown, reflecting businesses’ nerves about Rachel Reeves’ Budget measures.
New Office for National Statistics (ONS) figures showed growth in the UK economy inching up.
Business analysts warned over several months that pre-Budget speculation had dampened spending and investment levels.
The figures will also pile pressure on Reeves and the rest of the Labour government, with economic growth being the party’s central mission.
A Bloomberg poll of economists predicted zero growth earlier this week before the prediction was revised up to 0.1 per cent growth.
Over a three-month period, ONS researchers said the UK economy grew 0.3 per cent.
“The economy grew slightly in the latest three months, led by growth in the services sector, which performed better in November following a weak October,” said Liz McKeown, director of economic statistics at the ONS.
Disappointing figures for November came in construction, which suffered a decline in output of 1.3 per cent over the month.
The data body is expected to offer an estimate for economic growth over the calendar year when December figures are published next month.
Thomas Pugh, chief economist at RSM UK, said the economy “did little more than stagnate” in the final three months of last year and that there was “limited room for further rebounds”.
He said: “November’s unexpectedly strong rebound was boosted by some one-off factors, which won’t be repeated in December.”
Ruth Gregory, deputy chief UK economist at Capital Economics, said the rise in output in accounting and IT “did little more than reverse the big declines in the past few months”.
She added: “We think November’s strength is more likely to be a rebound rather than a sign that the economy is fundamentally stronger than we thought.”
UK economy ‘scraping along the bottom’
The UK economy grew at a faster pace in the earlier parts of the year as finance chiefs rushed to invest in goods and services to get ahead of expected tariffs from President Trump and higher tax levels from April.
The ONS has said that growth in the first quarter of 2025 was 0.7 per cent before dropping to 0.2 per cent and 0.1 per cent in the second and third quarters of the year.
A Treasury spokesperson said: “To make the economy work for working people, we are reversing years of underinvestment by protecting record infrastructure investment, driving through major planning reform, backing expansion at Heathrow and Gatwick, delivering Northern Powerhouse Rail and getting Sizewell C built.”
Shadow business secretary Andrew Griffith said the UK was “scraping along the bottom” on growth while Martin Beck, the chief economist at WPI Strategy who served as a Treasury analyst, said the rise helped overcome two consecutive months of decline.
“With GDP appearing to have expanded only marginally in the fourth quarter of last year, unfavourable base effects will mechanically depress calendar-year growth,” Beck said.
“Fiscal policy will also be a significant drag: tax rises announced by both the current government and its predecessor mean the UK faces the largest discretionary fiscal tightening in the G7 this year, according to the IMF.”
UK economy ‘hindered by public sector’
Economists have pencilled in lower growth over the upcoming year than in 2025, with forecasts among City banks and consultancies ranging between 0.7 per cent and 1.4 per cent for the full year.
Some forecasters believe falling interest rates could give companies and consumers some much-needed relief although business leaders have also warned that higher growth is set to be driven by government expenditure.
The Confederation of British Industry’s chief economist Louise Hellem said a growth upgrade written in by the industry group should be interpreted as “cautious optimism” rather than “cause of celebration”.
Hellem warned that private sector growth was being held back by “underlying challenges” in heavy red tape, high taxation and soaring energy prices while Panmure Liberum’s Simon French has warned that the public sector could be “crowding out” growth among private firms.
The government has also pivoted its communications focus to the “cost of living” over economic growth, highlighting changes on inflation and extra welfare support for some large families as evidence of its work in easing price pressures on Britons.