TD Securities expects UK GDP to rise 0.1% month on month in December. The rise is mainly linked to manufacturing, expected at +0.1% m/m, while the market view is -0.1% m/m.
Services are expected to be flat in December, versus a market forecast of 0.1%. The December result would leave Q4 2025 GDP at 0.2% quarter on quarter.
Q4 Growth Outlook And Policy Signal
The 0.2% q/q outcome matches both consensus and the MPR projection. Services in Q4 2025 are expected at 0.1% q/q.
The weak pattern of growth is described as supporting a March rate cut view. The article notes it was produced with assistance from an AI tool and reviewed by an editor.
Back in late 2025, we were anticipating that tepid fourth-quarter GDP figures would strengthen the case for an early rate cut. The expectation was that even a slight 0.2% quarterly gain, driven by flat services, would signal to the Monetary Policy Committee that economic slack was building. This view set the stage for a potential policy pivot early in the new year.
The official data released in January confirmed this economic weakness, with the UK economy ultimately recording 0.0% growth in the final quarter of 2025, narrowly avoiding a recession. This outcome was even softer than the modest growth that had been forecast. As a result, market pricing now implies an 85% probability of a 25-basis-point rate cut at the upcoming March meeting.
Market Positioning Implications
Recent inflation figures have further solidified this outlook, with the Consumer Price Index for January falling to 2.8%, continuing its steady decline towards the 2% target. We have also seen the labour market continue to soften, with wage growth cooling and the unemployment rate edging up to 4.4% in the three months to December. This combination of stagnant growth and disinflation gives the MPC a clear runway to begin easing policy.
For derivative traders, this points towards positioning for lower UK interest rates over the coming weeks. Strategies that benefit from a drop in short-term rates, such as buying put options on SONIA futures or establishing forward rate agreements that lock in a lower future borrowing cost, are now warranted. These trades align with the overwhelming consensus that a rate cut is imminent.
This policy divergence is also likely to put downward pressure on the Sterling. Traders could use FX options to express a bearish view on GBP, particularly against currencies where the central bank is expected to remain on hold. Buying put options on GBP/USD, for instance, offers a way to profit from potential currency weakness while strictly limiting the upfront risk.
