UK economy limped into the end of last year before Iran war

The London skyline is seen with the financial district in the background, in London, Britain, Mar 25, 2026. REUTERS

Britain's economy barely grew at the end of 2025, official data confirmed on Tuesday, adding to the challenge for the government to keep growth on track in 2026 ‌with the Iran war likely to hit demand and push up inflation.

Gross domestic product increased by 0.1% in the October-to-December period, the Office for National Statistics said.

Economists polled by Reuters had forecast the reading for gross domestic product in the fourth quarter would be unrevised.

Growth in the third quarter was also confirmed at 0.1%, the Office for National Statistics said.

UK households put more money aside with the savings ratio increasing by 0.8 percentage points to 9.9%, the ONS said.

Last week the Organisation for Economic Cooperation and Development cut its forecast for UK economic growth this year to 0.7% from a previous forecast of 1.2%, the biggest downgrade of any major economy.

That would represent a halving of the pace of growth seen over 2025 ‌which the ONS revised up to 1.4% from a previous estimate of 1.3%.

British Prime Minister Keir Starmer and finance minister Rachel Reeves have promised voters that they will speed up the economy, a challenge that looks even bigger against the backdrop ⁠of the conflict in the Middle East.

Tuesday's data from the ONS showed Britain's economy in the fourth quarter was 1.0% higher than a year earlier - unchanged from the ONS's initial ⁠estimate - while on a per capita basis, output was 0.1% lower than the year before.

Britain's current account deficit in the three months to the end of December totalled 18.4 billion pounds ($24.29 billion), compared with a Reuters poll forecast of 23.4 billion pounds and equivalent to 2.4% of GDP, larger than 1.4% in the third quarter.