The UK economy returned to a growth trajectory in November after a disappointing start to the fourth quarter, although the outlook for the British economy remains uncertain. Data released by the Office for National Statistics showed that gross domestic product expanded by 0.3% month on month in November, following a 0.1% contraction in October. On an annual basis, the UK economy grew by 1.4% in November, up from 1.1% in the previous month.
The improvement was largely driven by strong performance in the manufacturing sector, which recorded 2.1% monthly growth, benefiting from the continued resumption of operations at Jaguar Land Rover plants as they recovered from a cyberattack suffered last year. Despite this rebound, analysts caution that the pace of growth remains modest and does not yet signal a meaningful improvement in the broader economic outlook, particularly given ongoing downside risks and mounting fiscal pressures. Much of the government’s available fiscal headroom has been eroded following recent reversals of certain policy measures.
UK Chancellor Rachel Reeves raised taxes late last year in an effort to strengthen her ability to reduce the budget deficit and fund higher social spending, although the increases were smaller than initially anticipated. She also recently announced a £4.3 billion support fund aimed at cushioning the hospitality sector from rising costs, as pandemicera support schemes are set to expire in April and property revaluations take effect.
On the monetary policy front, the Bank of England cut interest rates at its final meeting of 2025 in December, with expectations building for additional rate reductions during the current year as inflation continues to ease. Members of the Monetary Policy Committee indicated that falling energy prices and cost of living relief measures included in the Autumn Budget could help bring inflation back toward the 2% target by mid 2026.
It is worth noting that UK inflation fell to 3.2% in November 2025, marking a larger than expected decline, though it remains above the Bank of England’s target. This underscores the ongoing challenge facing policymakers as they seek to balance economic support with the need to contain inflationary pressures.
Stay informed about global markets through our previous analyses. and Now, you can also benefit from LDN company services via the LDN Global Markets trading platform.
