A look back at the UK in 2025

This report is from this week’s CNBC’s UK Exchange newsletter. Like what you see? You can subscribe here.

The dispatch

It is tempting, in assessing what 2025 brought for the U.K. economy and for Britain’s corporates and financial markets, to focus more on what didn’t happen than on what did.

Most obviously, widely expected interest rate cuts from the Bank of England did not materialize to the extent that had been expected, while inflation failed to decline as the Bank —  and others —  had expected it to.

For the economy as a whole, though, forecasters were largely correct.

At the beginning of the year, most expected the U.K. to grow by between 1.3%-1.5%, according to the regular comparison of independent forecasts compiled by the Treasury.

The outcome has been more or less in line with those expectations but, looking at the latest comparison published last month, it is remarkable how little the consensus has shifted despite most commentary around the U.K. economy being unrelentingly negative.

That big picture also disguises some fascinating trends. U.K. GDP grew by 0.7% during the first three months of the year which, as the Chancellor of the Exchequer (U.K. Finance Minister) Rachel Reeves became fond of reminding people, was the best of any G7 economy.

That growth, however, was flattered by exporters building inventories ahead of U.S. President Donald Trump’s imposition of tariffs and, by the middle of the year, it was clear the U.K. had settled into the pattern seen in 2024 — with strong first-quarter growth petering out.

Growth was just 0.3% in the second quarter and a mere 0.1% in the third. September and October, the latest months for which figures are available, both saw the economy contract, month on month, by 0.1% reflecting, firstly, a plunge in car production caused by a cyber-attack at Jaguar Land Rover, the country’s biggest carmaker, and secondly, a becalmed housing market and weak consumer spending ahead of the November Budget.

It means the economy, at the end of October, was no bigger than at the end of May. 

As the end of 2025 approaches, the jobs market is flashing a red light for danger. The unemployment rate has ticked up to 5.1%, a level not seen since January 2021, while a closely watched survey published on Monday this week by the Recruitment and Employment Confederation (REC) reported that new job postings between October and November fell by 14.4%.

That may well reflect concerns among employers about what Reeves would announce in her Budget, delivered on Nov. 26, but is nonetheless surprising given the extent to which sectors like retail hire extra workers in the run-up to Christmas.

It suggests the big increase in employer’s National Insurance Contributions (NICs, a payroll tax), announced by Reeves in Oct….