- UK economic growth moderated further in the third quarter to 0.1%, down from 0.7% and 0.3% in the first two quarters of the year. Activity is expected to remain subdued for the final three months of the year, with growth for 2025 as a whole forecast to be around 1.3%, a pace consistent with last year and in line with expectations for growth in 2026.
- The recent Autumn Budget unveiled tax rises worth £26bn by the end of this parliament but also eased fiscal policy in the interim. The resulting increase in fiscal headroom from £10bn to £22bn eased bond market concerns over the government’s ability to meet its fiscal rules.
- Policy announcements mean that both taxation and public spending as a share of GDP are expected to reach some of the highest levels not seen outside recessions or wartime. Government debt is also expected to remain at a high level throughout the parliament.
- Uncertainty about the global trading environment continues to weigh on sentiment. The latest Deloitte CFO survey for the third quarter of 2025 shows that geopolitics remains the top external risk for businesses, accompanied by a rising concern over weak UK productivity and competitiveness. Finance leaders are choosing to prioritise defensive strategies such as cost reduction and expect capex, discretionary spending and hiring to fall over the next 12 months. Other timely economic indicators suggest consumers also remain cautious, prioritising saving over spending.
- Inflation remains above the Bank of England’s 2% target. The Bank expects inflation to have peaked in recent months and will slowly fall back to target over the next two years. As such, the Bank of England signalled a continued policy of gradual monetary policy easing, evidenced by maintaining interest rates at 4% last month following their decision to cut rates by 0.25 percentage points in August.
- Timing: the government’s next fiscal update is expected to take place in spring 2026.
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