Rachel Reeves has doubled down on the government’s economic plan and insisted there will be no change in strategy despite growth sitting at just 0.1 per cent in the final quarter of last year.
The chancellor rejected calls to change course, arguing that Labour’s plan is “beginning to deliver” for people.
Asked whether the government plans to change its strategy in light of the latest sluggish growth figures, the chancellor told broadcasters: “We have a plan. We have a plan to grow our economy, and that plan is beginning to deliver.
“We are putting more money in people’s pockets. Is there more to do? Absolutely, which is why we’ve reformed the planning system to make it easier to build in Britain. It’s why we are reducing the regulatory burden to make it easier for businesses to invest in Britain.
“It is why we’re putting money in people’s pockets of working families by improving the childcare available to parents of young children. All of these things are good for productivity, are good for growth,” Ms Reeves said.
She added: “We’ve got the right economic plan. It is beginning to deliver for people in our country and we’ll be sticking to that plan.”
Her reluctance to change tack comes despite revelations this week that health secretary Wes Streeting had previously voiced concerns that the government had “no growth strategy” in messages between himself and Lord Peter Mandelson, published as part of an attempt to prove he had nothing to hide when it comes to his relationship with the disgraced peer.
In new figures published on Thursday, the Office for National Statistics (ONS) said UK GDP grew by 0.1 per cent in the final quarter between October and December last year, following growth of 0.1 per cent in the third quarter.
The fourth quarter figures mean the economy grew by 1.3 per cent overall in 2025, up from 1.1 per cent in 2024 and the highest growth since 2022, but lower than the 1.4 per cent expected by the Bank of England and most economists.
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It follows a volatile end to 2025 for the British economy, with output declining by 0.1 per cent in October and then rebounding by a downwardly revised 0.2 per cent in November as the manufacturing sector was boosted by recovering production at Jaguar Land Rover after its major cyber attack.
Budget uncertainty added to pressure in the quarter, with the long lead-up widely seen to have held back growth ahead of the 26 November fiscal event.
It is still expected that the first quarter of 2026 will show a stronger level of growth, but meaningful and sustained economic expansion remains dependent on inflation coming down and businesses adapting to new, higher levels of costs – while unemployment also remains above 5 per cent.
Ms Reeves gave little justification for the muted end to the year, but insisted the government “has the right economic plan to build a stronger and more secure economy, cutting the cost of living, cutting the national debt and creating the conditions for growth and investment in every part of the country”.
Meanwhile, the prime minister said the figures showed the economy was growing. Writing on X/Twitter, he added: “I know there’s more to do, but we are heading in the right direction.”
The figures showed the UK’s dominant services sector flatlined in the fourth quarter with zero growth, while production expanded by 1.2 per cent and construction fell by 2.1 per cent, marking the sector’s worst growth for over four years.
The Bank of England on Thursday cut its growth forecast for 2026, from 1.2 per cent to 0.9 per cent, and for 2027, from 1.6 per cent to 1.5 per cent.
Liz McKeown, ONS director of economic statistics, said: “The economy continued to grow slowly in the last three months of the year, with the growth rate unchanged from the previous quarter.
“The often-dominant services sector showed no growth, with the main driver instead coming from manufacturing.
“Construction, meanwhile, registered its worst performance in more than four years.
“The rate of growth across 2025 as a whole was up slightly on the previous year, with growth seen in all main sectors.”
The British Chambers of Commerce (BCC) has called for government action to back up their words to aid economic recovery, noting that small businesses are holding back on spending due to lingering fears about rising taxation and other cost pressures.
“Improving the outlook now depends on restoring business dynamism. Government must move from strategy to delivery – backing infrastructure projects, speeding up planning decisions, addressing skills gaps, and strengthening export support – so firms can invest, export and grow,” said the BCC’s head of research, David Bharier.
The Trades Union Congress (TUC) meanwhile, pointed out that the year-long growth was a recent high, but general secretary Paul Nowak still urged the Bank of England to cut interest rates more quickly to stimulate spending.
“It’s welcome that the economy kept growing in December, and last year’s growth of 1.3 per cent was the strongest for three years,” he said.
“But many workers are not yet feeling the benefit in their pockets. Many working families don’t have any money left over to spend on the things that keep our economy moving.
“This doom loop must end. Ministers must stay laser-focused on cutting working people’s household costs and improving living standards this year.
“And the Bank of England must go further and faster with quickfire interest-rate cuts in the months ahead.
“Britain needs to finally move on from the cost of living crisis that’s kept us stuck for too long – the priority must be helping families to spend and businesses to invest.”
