Reeves insists there will be no change in strategy despite sluggish economic growth
Rachel Reeves doubled down on the government’s economic plan and insisted there would be no change in strategy despite growth remaining at just 0.1 per cent in the final quarter of last year.
The Chancellor rejected calls to change course, claiming Labour’s plan was “starting to come true” for people.
Asked whether the government planned to change its strategy in light of the latest slow growth figures, the chancellor told broadcasters: “We have a plan. We have a plan to grow our economy and that plan is starting to happen.”
“We’re putting more money in people’s pockets. Is there more to do? Absolutely, that’s why we’ve reformed the planning system to make it easier to build in Britain. That’s why we’re reducing the regulatory burden to make it easier for businesses to invest in Britain.”
“So we’re putting money in the pockets of working families by improving the child care available to parents with young children. All of that is good for productivity, good for growth,” Ms. Reeves said.
He added: “We have the right economic plan. It’s starting to benefit people in our country, and we’re going to stick to that plan.”
His reluctance to change tack came despite this week’s revelation that Health Secretary Wes Streeting had previously expressed concern that the government had “lacked any growth strategy” in messages between him and Lord Peter Mandelson; The message was posted as part of his attempt to prove that he had nothing to hide when it came to his relationship with his 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 of last year between October and December, 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, down from 1.1 per cent in 2024 and the highest growth since 2022, but below the 1.4 per cent expected by the Bank of England and most economists.
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This follows a volatile end to 2025 for the British economy; production fell 0.1 percent in October and then rebounded to a downwardly revised 0.2 percent in November as the manufacturing sector revived as production recovered following Jaguar Land Rover’s massive cyber attack.
Budget uncertainty added pressure in the quarter; The long-awaited growth appears to be holding back growth ahead of the November 26 fiscal event.
The first quarter of 2026 is still expected to show a stronger level of growth, but meaningful and sustainable economic growth remains dependent on inflation falling and businesses adjusting to new, higher costs, while unemployment remains above 5 percent.
Ms Reeves gave little justification for the quiet end to the year but insisted the government “has the right economic plan to build a stronger and more secure economy, reduce living costs, reduce the national debt and create the conditions for growth and investment in every part of the country”.
Meanwhile, the prime minister said the figures show that the economy is growing. Writing on X/Twitter, he added: “I know there’s more to be done, but we’re heading in the right direction.”
Figures showed Britain’s dominant services sector held steady at zero growth in the fourth quarter, with manufacturing rising 1.2 per cent and construction falling 2.1 per cent, marking the sector’s worst growth in more than four years.
The Bank of England on Thursday reduced its 2026 growth forecast from 1.2 percent to 0.9 percent and its 2027 growth forecast from 1.6 percent to 1.5 percent.
ONS director of economic statistics Liz McKeown said: “The economy continued to grow slowly in the last three months of the year, with the rate of growth remaining unchanged from the previous quarter.
“The usually dominant services sector did not show growth; the main driver came from manufacturing instead.
“Meanwhile, construction recorded its worst performance in more than four years.
“The overall growth rate in 2025 increased slightly compared to the previous year, and growth was seen in all main sectors.”
British Chambers of Commerce (BCC) said small businesses were cutting spending due to ongoing fears of increased taxation and other cost pressures, and called on the government to take action to back up its promises to help the economic recovery.
“Improving the outlook now depends on restoring business dynamism. The government must move from strategy to delivery – supporting infrastructure projects, accelerating planning decisions, addressing skills gaps and strengthening export support – so firms can invest, export and grow,” said David Bharier, BCC’s head of research.
Meanwhile, the Trades Union Congress (TUC) noted that year-round growth had reached its highest level in recent times, but the general secretary Paul Nowak was still calling on the Bank of England to cut interest rates faster to stimulate spending.
“It is pleasing that the economy continued to grow in December and last year’s 1.3 percent growth was the strongest growth in the last three years,” he said.
“But many workers are yet to see the rewards in their pockets. Many working families run out of money to spend on the things that keep our economy going.”
“This cycle of disaster must end. Ministers should focus on reducing working people’s housing costs and improving living standards this year.”
“And the Bank of England needs to go further and faster with rapid rate cuts in the coming months.
“Britain finally needs to break free from the cost of living crisis that has kept us stuck for too long – the priority must be to help families spend and businesses invest.”
