The UK economy grew by 0.3% in November 2025, according to the monthly GDP figure announced by the Office for National Statistics (ONS) this week. The growth has been attributed to a boost to the services sector and a manufacturing recovery.
Following a 0.1% dip in October 2025, many economists expected a moderate increase of 0.1% in November. The 0.3% is not just a surprise, but the highest monthly reading since June last year.
Ben Caswell, senior economist at the National Institute of Economic and Social Research, said: "Today’s data is welcome news for the UK economy, with GDP growing modestly in November despite the uncertainty in the run-up to the Budget."
What is the current state of the UK economy?
UK economic growth dipped in October 2025 after a strong start to the year. This was attributed to a drop in consumer confidence in the run-up to the Autumn Budget and to car manufacturing failing to fully bounce back following the cyber-attack on Jaguar Land Rover in September. The ONS figure for September 2025 was initially recorded as a 0.1% drop, but has since been revised to a 0.1% increase.
The November recovery has been put down to car production normalising and consumer-facing industries recovering. According to the ONS, the service industry grew by 0.3% and manufacturing by 2.1%. The service industry is such a huge part of the UK economy, even a small amount of growth will have a significant overall impact.
In November, this was enough to balance out what the ONS called the construction industry's "largest three-monthly fall in nearly three years." This has been blamed on a severe dip in housebuilding.
Why has the UK economy grown?
The numbers point to a brief fall in consumer confidence in the run-up to the Autumn Budget and a manufacturing downturn in the wake of the Jaguar cyber-attack, followed by a quick economic recovery despite long-term construction issues.
Restaurants, shops and other consumer-facing industries recorded a 0.5% growth in the three months to November 2025, despite the October blip. This is still a modest expansion, but suggests a positive growth trajectory for a significant arm of the UK's economy.
Ben Caswell gave additional credit to the Autumn Budget, specifically that doubling the fiscal headroom "appears to have eased speculation over future tax policy and the uncertainty that came with it".
What does economic growth mean for interest rates?
The Bank of England's Monetary Policy Committee (MPC) will next meet on 5th February 2026 to decide if the base rate of interest should change. At its last meeting on 17th December 2025, the MPC voted by a slim 5-4 majority to reduce the rate by 0.25 percentage points, to 3.75%.
Despite the unexpected economic growth for November 2025, the swaps market has not changed its outlook on interest rate cuts. This could change in the coming days, but at the time of writing, a quarter-point cut by June is fully priced in. This will disappoint borrowers who had hoped that the December decision would trigger a series of further cuts to borrowing costs in the first half of 2026.
In theory, unexpected economic growth could actually see the rate of cuts slow further, as the Bank would have less need to lower rates to stimulate the economy - potentially risking higher inflation - if the economy is already growing.
Suren Thiru, economics director at the Institute of Chartered Accountants in England and Wales, said the news would give the Bank "sufficient comfort over economic conditions to delay voting to ease policy again".
Where will interest rates go in 2026?
The trajectory of interest rates in 2026 will depend on the performance of the UK economy and the rate of inflation. Food and energy prices are expected to help temper inflation in 2026, so the cost of borrowing could depend on how the economy performs throughout the year. A strong economy would likely reduce pressure on the Bank of England to cut rates.
There is optimism that the economic growth will continue into 2026. Yael Selfin, chief economist at KPMG UK, said: "With the worst of the uncertainty behind businesses, we expect growth momentum to continue over the coming months."
However, Ruth Gregory, economist at Capital Economics, said the November 2025 growth "is more likely to be a rebound rather than a sign that the economy is fundamentally stronger than we thought".
If you are interested in learning more about where interest rates might go in the future, check out our article on the latest UK interest rate predictions.
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