U.K. Economy Returns to Growth in November, but Outlook Remains Fragile

The U.K. economy returned to growth in November after a disappointing start to the fourth quarter, although the country’s economic prospects remain uncertain.

Data from the Office for National Statistics showed that gross domestic product grew by 0.3% on the month, after contracting by 0.1% in October. On an annual basis, the economy expanded by 1.4%, up from 1.1% the previous month.

Manufacturing recorded strong growth of 2.1% in November, helped by the continued resumption of operations at Jaguar Land Rover’s factories as the recovery from last year’s cyber attack continued.

Still, analysts cautioned against over-optimism. Michael Brown, senior research strategist at Pepperstone, said the pace of growth remained “anaemic,” adding that risks to the outlook were still tilted firmly to the downside. He warned that fiscal pressures could persist, with recent government policy reversals eroding much of the budgetary headroom created in November.

Finance minister Rachel Reeves raised taxes late last year to support deficit reduction and higher welfare spending, though not as aggressively as feared. She has since announced a £4.3 billion support fund to cushion the hospitality sector from looming rate rises as pandemic-era relief measures expire in April.

The Bank of England cut interest rates at its final meeting of 2025, and further reductions are expected this year. Alan Taylor, an external member of the Monetary Policy Committee, said cooling energy prices and measures to cut living costs should help bring inflation back to the 2% target by mid-2026.

“Interest rates should continue on a downward path, if the data continues to match my outlook,” Taylor said.

U.K. inflation eased to 3.2% in November, falling more than expected but still remaining above the Bank of England’s target.