Weekly Briefing: Public Sector Productivity, Nuclear Funding, Economic Performance & First-Time Buyers

This week’s data paints a mixed picture of the UK economy. Public sector productivity remains subdued despite rising pay and headcount, while private sector growth closed the year on weak footing.

At the same time, investors are funnelling billions into nuclear fusion, betting on long-term technological breakthroughs. Closer to home, a million taxpayers missed the Self Assessment deadline, and first-time buyers are returning to the property market as mortgage rates ease.

Taken together, the stories reflect an economy navigating structural constraints, shifting sentiment, and selective pockets of optimism.

Read on for the full context.

Public Sector Productivity Stalls

Government employees recorded just a 0.1 per cent productivity improvement in Q3 2025 compared with a year earlier, despite strong wage growth across the public sector. According to the Office for National Statistics average regular earnings in the public sector rose by 7.9 per cent over the past 12 months, the fastest rate since records began.

Headcount has also increased. Since Labour took office after the 2024 general election, the public sector workforce has expanded by 88,000 staff. Spending on services including health, education and defence has risen more than 20 per cent since 2019, while measured output has increased by 14 per cent over the same period.

Growth in 2023 has been marked down to 0.8 per cent from 0.9 per cent, while 2024 is now considered flat rather than showing 0.3 per cent growth. Productivity remains below pre-pandemic levels.

Andrew Goodwin, chief UK economist at Oxford Economics, said: “It seems to be a widespread issue - it is not that any one particular part of the public sector is dragging down the average. It seems to be a general problem with the approach. That then becomes a management issue.” He added: “Part of the problem is a culture of believing there is lots of waste but it is not waste that is the issue, it is just inefficiency.”

Fusion Funding Surges

Nuclear fusion start-ups completed a record 43 funding rounds last year, raising $2.3bn according to PitchBook data. It marks the strongest fundraising year since 2021, as investors continue to back the promise of abundant, carbon-free energy.

Some of the sector’s leading players are now eyeing public markets. General Fusion plans to merge with a special purpose acquisition company in a deal valuing the business at roughly $1bn, while TAE Technologies is pursuing a listing through an all-stock merger valuing it at $6bn. Commonwealth Fusion Systems has already raised around $3bn privately.

There is, however, a divergence emerging. Newer entrants are completing more frequent but smaller rounds, while established firms are entering capital-intensive construction phases. Most remain focused on demonstration devices designed to prove they can generate more energy than they consume - a milestone yet to be achieved commercially.

Ted Brandt, chief executive of Marathon Capital, said: “You have got unproven technologies that are years and years away from cash flow... and they are getting these crazy, crazy valuations. You tell me how that possibly makes sense. That essentially means we are all funding the next SpaceX.”

Self Assessment Deadline Missed by a Million

HMRC estimates that around one million people missed the 31 January 2026 Self Assessment filing deadline. While 11.48 million filed on time - most online - the final day still saw a rush, with nearly half a million submissions and more than 27,000 in the final hour.

Those who missed the deadline face an immediate £100 fixed penalty, even if no tax is owed. Further penalties escalate the longer the return remains outstanding, including daily fines after three months and percentage-based charges after six and twelve months.

Late payment penalties also apply, with 5 per cent charges on unpaid tax at 30 days, six months and 12 months, plus interest. For many, the cost of delay compounds quickly.

Economy Ends Year Weakly

The UK economy grew by just 0.1 per cent in the final quarter of 2025, according to the Office for National Statistics - ONS - below the 0.2 per cent expected by economists. Annual growth for 2025 came in at 1.3 per cent, slightly up from 1.1 per cent in 2024 but below official forecasts of 1.5 per cent.

Services - which account for around 80 per cent of output - showed no growth in the quarter. Production rose by 1.2 per cent, while construction contracted by 2.1 per cent, its worst performance in four years. Business investment fell 2.7 per cent and consumer spending increased by just 0.2 per cent.

The figures reinforce survey evidence that uncertainty ahead of the autumn budget weighed on activity, as referenced earlier in relation to public sector pressures. Ruth Gregory, deputy chief UK economist at Capital Economics, said: “The big picture is that private sector activity still appears to be extremely subdued.”

Liz McKeown, director of economic statistics at the ONS, summarised the position: “The economy continued to grow slowly in the last three months of the year, with the growth rate unchanged from the previous quarter. The often-dominant services sector showed no growth, with the main driver instead coming from manufacturing. Construction, meanwhile, registered its worst performance in more than four years.”

First-Time Buyers Return

First-time buyers accounted for 34.3 per cent of purchases in January - the highest January proportion recorded by Connells Group in 20 years. The improvement follows a sluggish end to 2025 and reflects falling mortgage rates, particularly for higher loan-to-value products.

Aneisha Beveridge, research director at Connells Group, noted that momentum built through the month. She added that more first-time buyers are opting to shorten mortgage terms, potentially delivering long-run savings. The proportion choosing terms longer than 30 years has fallen to 52 per cent, down from 60 per cent in 2023.

The shift may also support transaction levels more broadly, especially as existing homeowners remain less active - in part due to stamp duty costs. Nearly half of agreed sales in London were to first-time buyers, reflecting both improved affordability at the margin and structural barriers for movers.

David Hollingworth of L&C Mortgages highlighted another challenge facing younger buyers: “Many younger buyers are already struggling with deposits, moving costs and rising living expenses.”

Final Note

Public sector productivity remains constrained, private sector growth is subdued, and fiscal decisions continue to shape behaviour.

Yet there are targeted areas of forward movement - whether in long-term energy investment or renewed activity among first-time buyers.

But, the broader direction will depend less on isolated positives and more on whether confidence, productivity and investment can strengthen in tandem, in the near future. With fewer abrupt policy decisions - and more consistent, constructive ones - confidence may have the space to rebuild, supporting all corners of the economy.