Britain’s Economic Growth Forecast
The Bank of England has warned that Britain’s economy is forecast to have zero gross domestic product (GDP) growth in the fourth quarter of 2025. This warning comes after the central bank’s Monetary Policy Committee (MPC) voted to cut interest rates from four per cent to 3.75 per cent. The rate cut is expected to benefit mortgage holders and borrowers.
Current Economic Situation
The UK’s GDP growth for October 2025 came in at negative 0.1 per cent, according to the latest figures from the Office for National Statistics (ONS). This signals a slowdown in the economy. The first quarter of 2025 saw positive 0.7 per cent GDP growth, whereas the second and third quarters of this year have seen 0.3 per cent and 0.3 per cent growth bursts, respectively.
Projections for the Current Quarter
The Bank stated that GDP growth had eased to 0.1 per cent in 2025 Q3, slightly below the rate expected in the November Report. Bank staff analysis suggested that some of this softening was erratic, with underlying quarterly GDP growth closer to 0.2 per cent. However, monthly GDP had declined by 0.1 per cent in October, due to a further fall in market sector output. This was weaker than had been expected in the November Report, and Bank staff now expect zero growth in headline GDP in Q4.
Risk of Recession
The recent plateau in GDP growth has resurrected concerns over a potential recession, which occurs when a country experiences two consecutive quarters of negative economic growth. Britain’s economy last experienced this phenomenon in the third and fourth quarters of 2023, which is defined as a "technical recession". The last economic crash occurred as a result of the Covid-19 pandemic in early 2020.
Expert Opinions
Professor Joe Nellis, an economic adviser at accountancy firm MHA, said: "The risk of the UK posting zero GDP growth in the final quarter of 2025 is increasing as economic momentum fades. Despite lower inflation, household spending remains under pressure, business investment is cautious, and tight financial conditions continue to restrain activity." Julian Jessop, an economics fellow at the Institute of Economic Affairs, added: "The news that inflation is falling more quickly than expected is mostly welcome, but it may also be a warning that the risks of recession are rising."
Inflation Rate
The CPI inflation rate eased to 3.2 per cent in the 12 months to October 2025, a greater drop than anticipated from most economists. However, UK inflation is still some way above the MPC’s two per cent target and one per cent higher than in the euro area.
Conclusion
The Bank of England’s warning of zero GDP growth in the fourth quarter of 2025 is a cause for concern. The current economic situation, combined with the risk of recession and high inflation, poses a significant challenge to the UK economy. The consequences of stagnant output would be material, weakening job creation, slowing income growth, and limiting a much-needed recovery in tax revenues. As economists on both sides of the Atlantic sound the alarm over recession signs, it is essential to monitor the situation closely and consider policy support to prevent prolonged economic inertia.
