UK growth outlook 'not overly favourable' as 'slowdown likely on the way' in 2026
|We finally received some long awaited good news out of the UK economy yesterday in the form of a remarkably robust November growth figure. Britain’s economy roared back to life with solid expansion of 0.3% MoM, well above the near stagnation pencilled in by economists (+0.1%).
To our surprise (and most of the market it seems), businesses appeared largely unfazed by the high uncertainty surrounding the Autumn Budget, while consumers continue to spend despite the clear cooling in the jobs market in the past year or so.
Sterling received a modest leg up on the news, and could be poised for further gains should the upbeat data dampen the likelihood of further BoE rate cuts (the next 25bp cut is now not fully priced in until June).
We would caveat any optimism with a few points. Firstly, this monthly growth number tends to be very volatile and hard to predict (the full quarter figures due in mid-February should be much more revealing). The contraction in October also means that Britain’s economy also looks set to have posted only modest expansion in Q4 (probably something in the region of 0.1-0.2%).
We contest that the outlook is also not overly favourable in 2026, with a mild slowdown likely on the way. While a continued drop in inflation should ease pressure on household pay packets, a growing tax burden, high mortgage rates and a further tick upwards in joblessness all present material downside risks to the outlook.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.