UK economy returns to growth despite caution over Rachel Reeves's Budget

The economy grew faster than expected, with City economists projecting growth of just 0.1 per cent.

GDP measures economic growth by calculating the total monetary value of all final goods and services produced within the country, over a specific period.

In the three months to November, GDP grew by 0.1 per cent, after showing no growth in the three months to October.

ONS director of economic statistics Liz McKeown said: “The economy grew slightly in the latest three months, led by growth in the services sector, which performed better in November following a weak October.

“This was partially offset by a fall in manufacturing, where three monthly growth was still affected by the cyber incident that impacted car production earlier in the autumn.

“However, data from the latest month show that this industry has now largely recovered.

“Construction contracted again, registering its largest three-monthly fall in nearly three years.”

In response to the figures, a Treasury spokesman said: “To make the economy work for working people, we are reversing years of underinvestment by protecting record infrastructure investment, driving through major planning reform, backing expansion at Heathrow and Gatwick, delivering Northern Powerhouse Rail and getting Sizewell C built.”

They said that at the same time, Government “are taking action to get bills and inflation down”, citing the move to take £150 off energy bills, and freeze rail fares "to deliver an economy that works for working people.

“There’s more to do – driving growth, delivering the consolidation to provide stability, keeping inflation low and stable, tackling the cost of living and bringing our borrowing costs down.”

Business investment had remained muted ahead of the Autumn Budget in November, which was compounded by a slowdown in the car industry in the wake of the JLR cyber attack.

Central to the Chancellor's ambitions has been to stimulate sustained growth in the economy, improve investment, and create jobs.

In fact, this time last year, she said: “For too long, we have accepted low expectations, accepted stagnation and accepted the risk of decline. We can do so much better.

“Low growth is not our destiny. But growth will not come without a fight.

“That’s what our Plan for Change is about. That is what drives me as Chancellor. And it is what I’m determined to deliver.”

Responding to the figures, Ben Caswell, senior economist at the National Institute of Economic and Social Research, today's figures are welcome news for the economy: “With GDP growing modestly in November despite the uncertainty in the run-up to the Budget.

“Given today’s figure, we now project that the economy grew 1.4 per cent in 2025 - a rise in the growth rate compared to the year before.

“Against this backdrop, the Chancellor more than doubled her fiscal headroom at the Budget in an effort to bolster economic confidence.

“While it is too early to see the full effect of this, the move appears to have eased speculation over future tax policy and the uncertainty that came with it.”

Despite some positivity among economists over the above-projection growth figures, Shadow Chancellor Sir Mel Stride took to X to say: “Growth is still flatlining.

“The Chancellor promised growth as her number one mission, but a failure to grip the benefits bills - and instead putting up taxes - is weighing heavily on business and the economy.

“Low growth is due to this Chancellor’s choices.”

The pound dipped slightly even as new data showed the economy expanded more quickly than forecast in November.

Sterling was still 0.1pc down against the dollar at $1.343, while holding broadly steady against the euro at €1.155.

Neil Birrell, chief investment officer at Premier Miton, said: “December’s figures will be key in showing how businesses and consumers responded to the Budget.

“November may reflect activity being pulled forward ahead of tougher conditions.

“The Chancellor may take some comfort from it, but it already feels like a moment from another time.”

Deutsche Bank has said the outlook for Britain’s economy has been “meaningfully” boosted by the latest official data.

The Bank’s chief UK economist Sanjay Raja said “what a difference a month makes” after the ONS revised its September data from a 0.1 per cent contraction to 0.1 per cent growth, and said GDP expanded by 0.3 per cent in November.

“What did we learn today? Simply, Budget uncertainty was a thing of the past.”

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