Source: Sharecast
Data from the Office for National Statistics showed that while production saw a 1.2% increase in output, the construction sector had a particularly weak quarter, with output decreasing 2.0%.
The normally dominant services sector also struggled, showing no growth over the fourth quarter.
The 0.1% rate was unchanged on the third quarter’s growth.
Over the year, GDP is estimated to have grown by 1.4%, revised upwards from the ONS’s earlier estimate of 1.3%.
The data also showed the households’ saving ratio grew to 9.9% in the fourth quarter, up from 9.1% in the previous three months. The ONS said the ratio was high by historic standards.
The UK economy has long struggled to gain momentum. But with inflation well off recent peaks and tracking back to the Bank of England’s long-term 2% target, the Monetary Policy Committee was widely expected to further reduce the cost of borrowing to help ignite economic growth.
The first cut was pencilled in for March. However, the outbreak of war in the Middle East and subsequent surge in global energy prices meant the MPC left Bank Rate unchanged and said it was ready to tackle any uplift in inflation.
Markets are now pricing in three rate rises this year, in contrast to previous expectations for two cuts.
Last week the OECD trimmed its forecast for UK GDP to 0.7% this year, from 1.2%, while inflation – which currently stands at 3% – was predicted to accelerate to 4%.
Danni Bell, head of financial analysis at AJ Bell, said: “Even before the start of the conflict in the Middle East, which is set to reignite global inflation, the UK was struggling.
“Consumers were nervous as unemployment numbers edged up and though real household disposable income increased in the final months of the year, many people were still choosing to save any bit of spare cash in case of emergency.
“The construction sector has been particularly weak, despite a big push by the government to get Britain building. Increased costs and potential rate hikes will only further weaken the outlook for housebuilders.”
Matt Swannell, chief economic advisor to the EY Item Club, said: “It’s clear that growth has been very sluggish in recent years and has been heavily dependent on the public sector. Of the 2.5% increase in GDP in the three years to the fourth quarter of 2025, 2.2 percentage points came from government consumption and investment.
“The public sector will likely continue to support activity in the near term. But while the growing reliance on the state as the primary driver of growth was already a concern, the conflict in the Middle East has weakened the private sector outlook further.”
