18th December Interest Rate Cut a 'Cert' as GDP Falls to 0.1%

The United Kingdom is on the verge of recession without remedial action as the Office for National Statistics released our latest gross domestic product (GDP – economic output growth) for the third quarter 2025 (July-September).  GDP fell from a revised down figure on 0.2% (Q2) to just 0.1% in Q3.

Real GDP per head flat lined at 0%.  This tells us that productivity is still poor and we expect this Q3 figure of 0.1% to be revised down in 0% when Q4s figures are released in early 2026.

Main points

• UK real gross domestic product (GDP) is estimated to have increased by 0.1% in Quarter 3 (July to Sept), compared with growth of 0.3% in Quarter 2 (Apr to June) 2025.
• GDP is estimated to have increased by 1.3% in Quarter 3 2025, compared with the same quarter a year ago.
• In output terms, growth in the latest quarter was driven by increases of 0.2% in services and 0.1% in construction; the production sector fell by 0.5%.
• Real GDP per head is estimated to have shown no growth in the latest quarter and is up 0.8%, compared with the same quarter a year ago.
• We have updated our estimates for Quarter 1 (Jan to Mar) 2024 to Quarter 2 2025 to be consistent with our UK trade release published on 16 October 2025; this update includes the full implementation of improvements to the measurement of precious metals.
• There are no changes to headline real GDP quarter-on-quarter growth across 2024 and 2025 as a result of this data update; however, there were some minor 0.1 percentage point revisions to the change in the GDP implied deflator, and the change in GDP in current prices for some quarters.

Comment

With an already forewarned, ‘taxing’ Autumn Budget due on 26^th November and the next Bank of England interest rate announcement not due until 18^th December, we cannot see the economy doing anything other than flatlining.

Comparing GDP 2024 figures to 2025

We suggest it is almost a ‘dead cert.’ that the Bank of England will cut interest rates by 0.25% to 3.75%pa on 18^th December.

Deep Dive Still Grim?

The figures look even grimmer when you ‘deep dive’ into the ONS report:

• When looking at monthly figures, GDP went negative in September -0.1% and August was adjusted down to 0%.  The economy is in reverse, hence our forecast of 0% overall for quarter 4.
• Production fell 2%.
• Services grew 0.2%.
• Construction grew 0.2%.
• Motor manufacturing fell 28.6%, mainly down to Jaguar/Land Rover cyber shutdown which contributed to 0.17% fall in GDP.

GDP would therefore have been a little positive for September at 0.07%, but only just, when the January/Land Rover figures are ignored.  That said 0.07% (as a guestimate by us) for September GDP is barely above recession.

The Chancellor’s additional £20bn ‘blackhole’ looks ever harder to fill, hence our view that interest rates will be cut, which should help business but will also reduce the costs of government borrowing.  As we suggest in this article’s title: 18th December Interest Rate Cut a ‘Cert’.