The U.K. economy returned to modest growth in November following a weak start to the fourth quarter, though the broader outlook remains uncertain.
Figures released on Thursday by the Office for National Statistics showed that gross domestic product expanded by 0.3% in November, reversing a 0.1% monthly contraction recorded in October. On a year-on-year basis, the economy grew by 1.4%, improving from the 1.1% annual pace seen a month earlier.
Manufacturing supports growth rebound
The manufacturing sector delivered a strong performance, with output rising 2.1% on the month. The increase was largely driven by the continued restart of production at Jaguar Land Rover facilities, as the company continues to recover from last year’s cyber attack.
Despite the rebound, analysts remain cautious about the strength of the recovery. Michael Brown, senior research strategist at Pepperstone, said the pace of expansion was still weak and offered little reassurance about the U.K.’s medium-term prospects. He added that downside risks persist, warning that recent policy reversals have significantly reduced the fiscal headroom outlined in November’s budget.
Fiscal pressures and targeted support
Chancellor Rachel Reeves raised taxes late last year to create more room to meet deficit-reduction goals and finance higher welfare spending, though the increases were smaller than many had anticipated. More recently, she announced a £4.3 billion support package aimed at easing the impact of upcoming rate increases on the hospitality sector, as pandemic-era relief measures expire in April and property revaluations take effect.
Rate cuts expected as inflation cools
On the monetary policy front, the Bank of England cut interest rates at its final policy meeting of 2025 in December. Further rate reductions are expected this year as inflation continues to slow, according to Alan Taylor, an external member of the central bank’s monetary policy committee.
Taylor said easing energy prices and cost-of-living measures introduced in the autumn budget should help bring inflation back to the 2% target by mid-2026. While British inflation cooled to 3.2% in November 2025—falling by more than forecast—it remains above the Bank of England’s goal, leaving policymakers cautious as they balance growth and price stability.
