UK economy ends 2025 quietly, but proves resilient

With one month of data to go before we get the full picture, it looks like the UK economy stared down higher operating costs and uncertainties in 2025 to grow by around 1.4%.

Firms in the real economy – those that make, do and serve – were on the frontline of responding to the triple threat of higher employer taxes, tariffs and Autumn Budget uncertainty in 2025. They also showed resilience in another year of start-stop growth.

We expect the real economy’s output to come in slightly under official GDP, but meet the RSM UK Real Economy Barometer 1.3% forecast. That means public spending shored up UK output while headwinds blunted private sector growth. The 2026 UK Economic Outlook highlights another year of muddling through and growth at similar levels.

What else do the Real Economy UK Economic Indicators tell us?

The latest RSM Credit Impulse − a forward indicator of growth − shows borrowing rebounded in December after pre-Budget jitters.

The RSM UK Financial Conditions Index remains comfortably in supportive territory, meaning firms could find trading, borrowing and investing easier if there’s the confidence to do so.

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Last updated: 26 January 2026

The UK real economy came back to life in November after struggling in October. Output grew 0.5% on the month, with Jaguar Land Rover’s production rebound lifting manufacturing by 2.1%.

Services in the real economy grew by 0.4%. That’s above the 0.3% recorded in official GDP. Both likely reflect business services activity brought forward ahead of the Autumn Budget.

It’s not all good news. Underlying momentum remained weak.

The real economy shrank 0.2% in the three months to November. Construction also fell again to register back-to-back declines of over 1%. This left the sector in November the same size it was in July 2024. With industry surveys also staying firmly in the doldrums, we see little chance of a recovery here in the near-term.

Real Economy Barometer explained

Real Economy Barometer explained

Providing clarity for business leaders operating in the UK’s real economy

The Real Economy Barometer more accurately describes the economic landscape as experienced by middle-market businesses.

Focusing on the UK’s goods- and service-producing sectors, it filters out certain public-sector components from official GDP data to provide business leaders with actionable insights.

How to use The Real Economy Barometer

We can better understand where growth is coming from, the factors influencing this and what it takes in the coming months to meet growth forecasts by comparing data for real economy output with official UK GDP.

Every month, following the release of official UK GDP data, our economists calculate how the real economy – accounting for 79% of the UK economy – is performing against the:

• UK economy’s total output
• our growth forecast (currently 1.3%).

Negative values show shrinkage in the size of the economy and positive values show growth.

How we calculate The Real Economy Barometer indicator

The Real Economy Barometer strips out the impact of imputed rents, public administration, education, human health, residential care, social work, libraries and museums, and social clubs from official GDP data.

Last updated: 30 January 2026

UK household and business borrowing continued their post-Budget bounce-backs in December from October and November’s lacklustre levels.

The RSM UK Credit Impulse reveals total UK borrowing rose to 0.4% of GDP in December. That’s up from 0.3% in November on the three-month average measure.

The big story is that it was businesses driving growth in December. Shaking off the previous months’ pre-Budget uncertainties, UK firms’ borrowing rose to 0.2% from 0%.

Household borrowing, which had returned in November after a subdued October, dropped marginally to 0.2% of GDP from 0.3%.

Looking at the data on a single-month basis, borrowing fell to 0.7% of GDP in December from 0.9% in November. It still suggests borrowing in the real economy is rebounding strongly from October’s -0.3% low.

On an annual basis, new credit flows averaged 0.6% of GDP in 2025, up from 0.5% in 2024. That’s consistent with our view that UK economic growth would pick up to 1.4% in 2025 from 1.1% in 2024.

Looking ahead, we expect the flow of new credit to rise again in January. Surveys suggest a revival in business optimism at the start of the new year, while October’s weak data will drop out of the three-month average.

Credit impulse explained

Credit impulse explained

Measuring the UK’s economic momentum

The RSM Credit Impulse is a real-time snapshot of new credit flowing into the UK’s private sector.

As a gauge of future economic momentum, it tracks both household and business borrowing, offering middle-market businesses insight into the direction of future growth.

How to use The RSM Credit Impulse

The RSM Credit Impulse gives you the ability to anticipate changes in the economic landscape.

It outlines capital investment and consumer spending intentions as a proportion of GDP.

• Positive values are a sign of good credit flows, investment and consumer confidence.
• Negative values suggest a tightening credit environment and caution in spending and investment.

How we calculate The RSM Credit Impulse indicator

The RSM Credit Impulse uses data from the Bank of England for lending flows and the ONS for nominal GDP. The change in lending flows is then calculated and divided by quarterly GDP to give a %.

Last updated: 26 January 2026

The RSM UK Financial Conditions Index (FCI) has improved to +1.6, close to its recent high. It means financial conditions supporting the UK economy continue to be firmly positive.

As well as the 4-week FCI average at +1.6, the 13-week average is reaching +1.4. Both figures suggest investment growth could increase over the coming quarters. Firms should find it easier to access credit and at a more reasonable cost as the premium on corporate debt continues to fall.

Standout performances include the more positive GBP/EUR exchange-rate volatility component (+1.8). If this continues, it means a more predictable currency environment for firms and banks making international investment decisions. The FTSE 100 also continued its bumper run, gaining around 20% y/y.

• Foreign exchange markets: +0.2 from 0
• Equity markets: +1.2 from +1.1
• Money markets: +1.4, unchanged from last update
• Bond markets: +0.6 from +0.5

Financial Conditions Index explained

Financial Conditions Index explained

A real-time gauge of financial stress

The RSM Financial Conditions Index (FCI) is a powerful metric that monitors the level of financial stress in the UK’s money, bond, equity and foreign exchange markets.

It offers near real-time insight into financial market movements, helping business leaders to gauge how shifts might impact the broader economy and its stability.

How to use The Financial Conditions Index

The FCI shows exactly how far current financial conditions diverge from historical norms.

This means we can understand if current financial conditions are supportive of business growth, investment and consumer spending, or not.

• Positive values indicate more accommodating financial conditions and easier credit availability – prerequisites for economic expansion.
• Negative values indicate tighter financial conditions, less credit availability and higher costs – dampeners for investment, confidence and growth.

How we calculate The Financial Conditions Index indicator

Items included in the composite RSM UK Financial Conditions Index are normalised by subtracting the mean and dividing by the standard deviation for each series.

The FCI, as a Z-Score, indicates the number of standard deviations by which current financial conditions deviate from normal levels.