Economy grew by just 0.1% in Q3 as ONS data shows slowing growth in second half of 2025
The Government faces a stark warning about the looming “spectre of recession” following economic stagnation in the latter half of 2025, with projections suggesting further weakness in the coming year.
New data released on Monday by the Office for National Statistics (ONS) revised downward the second quarter’s economic expansion to a modest 0.2 per cent from the previously reported 0.3 per cent.
The third quarter saw meagre growth of just 0.1 per cent, with the ONS indicating the figures illustrate a decelerating economy.
Lindsay James, investment strategist at Quilter, said the data “all but confirms what has become very clear in the second half of the year – the UK economy is grinding to a halt and showing little sign of achieving what it did in the first half of the year.”
The development represents a significant setback for Labour, which declared economic growth would be its “defining mission,” and for Rachel Reeves, who has placed her political credibility on delivering prosperity, as reported by City AM.
The Office for Budget Responsibility (OBR) concluded in Reeves’ November Budget – which included £26bn in tax rises – that the measures introduced would have no effect on growth.
James added: “The government is going to have to hope that previous measures taken to date begin to bear fruit, or that geopolitical challenges calm down enough that global trade can rebound,
“Unfortunately, neither seems particularly encouraging right now and as such the first half of next year is likely to be more of the same, if not worse with the spectre of recession beginning to loom.”
The UK economy’s momentum slowed as it entered the final quarter of the year, with October’s monthly data revealing a 0.1 per cent decline.
Sanjay Raja, Deutsche Bank’s chief UK economist, said: “For the first time this year, we see some meaningful risk of a marginal quarterly contraction in real GDP,”.
He added: “Indeed, Budget uncertainty combined with weak hiring and rising unemployment fear will likely see spending and investment more subdued to end the year.”
Looking ahead to the next 12 months, economists are forecasting more tepid growth prospects.
Alex Kerr, UK economist at Capital Economics, noted that with the economy decelerating “significantly” during the latter half of 2025, “we doubt 2026 will be much better”.
Capital Economics is projecting a 1.4 per cent rise in 2025, dropping to merely one per cent in 2026, with the public sector anticipated to be “the main source of growth”.
Following the Chancellor’s Budget announcement of an additional £11bn in government expenditure plans, the Confederation of British Industry ( CBI ) has forecast a 1.3 per cent expansion for the UK economy over the coming year. Chief economist Louise Hellem cautioned that the improved growth forecast should be viewed with “cautious optimism” rather than as “cause of celebration”, highlighting that private sector expansion was being constrained by “underlying challenges” in regulation, taxation and energy.
