The U.K. economy expanded by 0.1% month-on-month in December 2025, meeting expectations but failing to lift Sterling as disappointing quarterly figures and downward revisions overshadowed the headline number.
Key Points from the December GDP Report
- Monthly GDP grew 0.1%, matching consensus expectations, following a revised 0.2% growth in November (downwardly revised from 0.3% in the previous publication)
- Q4 2025 GDP rose 0.1% q/q, below the 0.2% consensus and matching Q3’s growth
- Annual GDP expanded 1.0% y/y in Q4, below expectations of 1.2% and down from a downwardly revised 1.2% in Q3 (previously 1.3%)
- Services output showed no growth in the three months to December 2025, marking the third consecutive month of zero growth on a three-month basis
- Production output grew 1.2% in the three-month period but fell 0.9% in December alone
- Construction output fell 2.1% in the three months to December, the largest decline since September 2021
- Full-year 2025 GDP grew 1.3%, up from 1.1% in 2024
Link to the December 2025 ONS GDP Monthly Estimate
The December data captured a mixed economic picture, with manufacturing providing the main support while the services sector stalled and construction weakened sharply. The quarterly growth miss of 0.1% versus 0.2% expected overshadowed the in-line monthly figure, reinforcing concerns about fading economic momentum heading into 2026.
The services sector stagnation raised particular red flags, with the third consecutive month of zero growth suggesting underlying weakness in the sector that accounts for 80% of the economy. Administrative and support service activities provided the brightest spot with 1.2% growth, while professional, scientific, and technical activities contracted 1.1% over the quarter. Construction’s 2.1% quarterly decline marked the worst performance since September 2021, with private housing new work falling 3.6%.
Downward revisions undermined confidence further. November’s growth was cut to 0.2% from 0.3%, while Q3 annual growth dropped to 1.2% from 1.3%, suggesting the economy had less momentum than previously estimated.
Market Reactions
British pound vs. Major Currencies: 5-min
The soft data reinforced expectations that the BOE will cut interest rates further, with markets pricing in a March cut following the narrow 5-4 vote to hold at 3.75% in early February.
Sterling, which had been leaning slightly bullish ahead of the release, delivered a muted reaction to the GDP report. The pound dipped modestly across most pairs right after the 02:00 EST release before stabilizing within familiar ranges.
GBP traded mixed in early European hours and did not see directional trading until the U.S. session. Weakness in U.S. equities limited USD demand, while some profit-taking likely weighed on commodity currencies. By the close, GBP was mixed, gaining against most majors except the relatively stronger EUR, JPY, and CHF.
Promotion: Master your trading psychology with AI-powered trade journal and backtesting! TradeZella helps you track, backtest, and eliminate bad habits automatically! Click on the link and use code “PIPS20” to save 20%!
Disclosure: To help support our free daily content, we may earn a commission from our partners if you sign up through our links, at no extra cost to you.
