Jaguar Land Rover boosts the UK economy as car production surges

• Car production a major boost to November GDP.
• Will the uplift to growth continue?
• Budget fails to knock consumer confidence.
• Market stunned by UK growth figures.
• Dovish BOE signals boost Gilts, but could limit sterling upside.
• Storm clouds recede for UK economy.
• Risk sentiment picks up as Iran/ US tensions ease.

The UK economy received a much-welcome boost in November. The economy expanded by 0.3% vs. 0.1% expected, helping to push the three-month growth rate to 0.1%, up from no growth in October.

The November boost to growth was provided by a surge in industrial and manufacturing activity, along with a pickup in the index of services, which rose by 0.3% in November, and by 0.2% for the 3 months to November.

Car production a major boost to November GDP

The sharp increase in manufacturing in November was driven by Jaguar Land Rover’s production returning to normal after the cyber-attack halted production last summer. Car production rose by 25% in November, and the ONS said that production is back to levels seen in August, before the cyber-attack crippled production. Although production is a drag on the 3 month-on-month rate, this is due to a staggered restart at JLR. Now that production has resumed, that headwind for the UK economy has hopefully passed.

Will the uplift to growth continue?

The impact from JLR on this GDP report is big, and the risk is that this is a one-off uplift for production growth. There is likely to be a backlog of orders at JLR, so production could be elevated for some time yet. However, true economic strength will depend on  the continued resilience in the service sector.

Budget fails to knock consumer confidence

Today’s bounce in November GDP suggests that the government’s flip-flopping over tax increase in the Budget did not knock consumer confidence. This could be a result of the government backing away from hiking income tax, which may have given consumers the confidence to spend in the lead up to the festive season.

Market stunned by UK growth figures

The pickup in UK growth has taken the market by surprise, as not one economist surveyed by Bloomberg expected growth to rise by this much. The pound has reversed some of its decline on the back of this data and GBP/USD may test $1.3450 later this morning if the upside momentum continues.

Dovish BOE signals boost Gilts, but could limit sterling upside

UK Gilts are outperforming their European counterparts this morning and the 2-year yield is down by more than 3bps after BOE policy maker Alan Taylor said that UK interest rates should fall further this year as easing domestic cost pressures, especially energy prices, should fall back. He also said that US tariffs meant that cheap exports destined for the US were now flowing into the UK, which could also keep a lid on price growth in the medium term and increase the chance of further rate cuts. Currently there are 2 rate cuts priced in for the UK this year, however, if inflation does fall at a faster rate, then interest rates could end the year lower than the 3.26% currently expected, which may keep a lid on sterling gains in the short term.

There are still pockets of weakness in the UK economy, for example, construction output declined by 1.3% in November, and is lower by 1.1% YoY. This suggests that the government’s pledge to boost UK growth through building is failing, with the consumer and manufacturing sector picking up the slack.

Storm clouds recede for UK economy

Today’s data sets the tone for a rebound in UK growth in Q1 of this year, after a torrid mid-year performance from the UK economy in 2025, with investment and consumption on an uptrend. The resilience of the UK in the face of political U-turns is worth noting. If the chancellor can keep budget noise at bay and reduce spending to boost fiscal headroom rather than increase taxes, the UK economy could be on a strong trajectory. Another positive is the continued decline in UK Gilt yields, which has extended into 2026 and may continue to boost businesses and the consumer. Perhaps the UK economy is not the sick man of Europe, after all.

Risk sentiment picks up as Iran/US tensions ease

Elsewhere, the risk premium built into metals and oil prices in recent days is eroding, and oil prices are sliding. Brent is lower by more than 2.8% as tension between Iran and the US  dials down.

This is the first decline in the oil price for 6 days and comes after Donald Trump signaled that the US would not strike Iran right now, as sources informed him that Iran would halt killing protestors. Precious metals also fell, especially the silver price, which is currently lower by 3.7%. US and European stock futures are pointing to a stronger open later, as geopolitical risk sentiment improves.