The UK economy showed moderate growth in December 2025, intensifying discussions around the Bank of England's next steps in cutting interest rates. According to the Office for National Statistics, the country's gross domestic product grew by 0.1% for the month—slower than the 0.2% growth in November (revised from 0.3%).

Overall, the economy grew by only 0.1% in the fourth quarter, repeating the dynamics of the previous three-month period. For the full year 2025, growth was 1.0%—below the 2024 level (1.1%) and significantly weaker than historical averages. The manufacturing sector contracted by 0.5% in December after a strong 1.9% growth the previous month, partly due to the exhaustion of the recovery in auto plants.

Economists note that the government's fiscal policy has been less restrictive for business activity than expected. According to Morningstar analyst Grant Slade, short-term growth risks have diminished, but the economy could slow in 2026 amid continued restrictive monetary policy and a cooling labor market.

The Bank of England left its key interest rate unchanged at its January meeting, following a series of rate cuts beginning in August 2024. The decision was made by a narrow margin, with four of the nine members of the Monetary Policy Committee supporting another cut.

Governor Andrew Bailey noted that inflation has declined significantly from peaks above 10% and, according to the regulator's forecasts, will return to the 2% target as early as this spring. This increases expectations for a possible policy easing at the next meeting in March.