31 March 2026
If you are covering the latest GDP quarterly national accounts from the Office for National Statistics, please find below a comment from Jonathan Raymond, investment manager at Quilter Cheviot:
“Confirmation that the UK limped over the line at the end of 2025 may not come as a surprise, but it underlines just how exposed the economy was entering 2026. Growth was already fragile, and while there were tentative signs of life at the start of the year, the latest bout of geopolitical turmoil has quickly snuffed them out. The latest quarterly figure from the ONS confirms that the UK economy grew by 0.1% in the final quarter, following 0.1% the quarter before. Much of this was caused by a 2% contraction in construction, while the critical services sector saw no growth at all. GDP for the year is estimated to have been marginally stronger than expected, but on a per capita basis the story is different.
“The UK has narrowly avoided the recession some feared would have arrived at some point in the past 18 months, but that should not be mistaken for strength. This is an economy stuck in stagnation. After a promising start to the year, momentum faded as businesses paused investment in response to tax changes and households grew increasingly cautious about what comes next. Inflation, meanwhile, has remained stubbornly above target, keeping interest rates higher for longer and tightening the squeeze on activity.
“Looking ahead, higher energy prices are beginning to impact economic activity, raising the risk of softer demand as consumers and households retrench just as inflationary pressures re‑emerge. It is a timely reminder of and how vulnerable the UK economy remains to events beyond its control, as evidenced by the OECD’s downgrade to its growth forecast for the UK last week.
“For the Bank of England, this presents an uncomfortable trade‑off. In normal circumstances, prolonged stagnation would argue for looser policy to support growth. But with inflation likely to rise again, the scope to cut rates is limited. Markets may be overestimating how far policy needs to tighten with expectations for at least 2 quarter-point interest rate rises this year, but the Bank will have to remain agile in responding to this energy shock if it is to prevent today’s weakness from hardening into something more lasting.”
