UK economy grows 0.3% in November, beating forecasts on services rebound

The UK economy grew stronger than expected in November, rebounding from the previous month’s contraction as the services sector led a modest pickup in activity, easing concerns over a weak end to the year.

Gross domestic product expanded by 0.3% in November, the Office for National Statistics said on Thursday, surpassing the 0.1% increase forecast by economists polled by Reuters and reversing a 0.1% decline in October.

The ONS also revised September’s figure to show growth of 0.1%, instead of an earlier estimate of a contraction.

The data come as the government has placed economic growth at the centre of its agenda, even as momentum has slowed since a 0.7% expansion in the first quarter of 2025 that was boosted by activity ahead of anticipated US tariffs.

Services, manufacturing drive rebound

The ONS said growth in November was primarily supported by the services sector, which expanded by 0.3% during the month.

Manufacturing output rose 2.1%, while industrial production accounted for about half of the overall increase in GDP.

“Data for the latest month show that this industry has now largely recovered” from earlier disruptions, said Liz McKeown, director of economic statistics at the ONS, referring to a rebound in production at Jaguar Land Rover after the carmaker was hit by a cyberattack earlier in the autumn.

On a less volatile three-month basis, the economy grew 0.1% in the three months to November, beating expectations of a 0.2% contraction.

McKeown said this measure had been driven by growth in services, though it was partly offset by a decline in manufacturing.

Construction recorded the largest three-month fall since March 2023.

It was only the second month of expansion in the second half of the year, underlining the fragile nature of the recovery.

Growth slows amid uncertainty and higher costs

Despite November’s improvement, growth has been weighed down in recent months by geopolitical uncertainty, elevated borrowing costs, disrupted auto production, and anticipation of tax-raising measures in Chancellor Rachel Reeves’ November Budget.

A Treasury spokesperson said in a Financial Times report that the government was working to reverse “years of underinvestment” and was “taking action to get bills and inflation down . . . to deliver an economy that works for working people”.

The Bank of England in December forecast no growth in the final quarter of 2025, after a marginal 0.1% expansion in the three months to September.

The central bank estimated that policies announced in the Budget, including U-turns on welfare cuts and the two-child benefit cap, could increase GDP by about 0.1 to 0.2 percentage points over the next few years, but warned that tax rises would weigh on growth beyond that.

Reeves announced an additional £26 billion ($35 billion) of tax rises in the Nov. 26 Budget as she sought to rebuild fiscal headroom, with much of the burden expected to fall on households over time.

Outlook points to tentative improvement

Some economists see scope for stronger growth early next year as recent drags fade.

Deutsche Bank economist Sanjay Raja said in the FT report that he expected stronger growth at the start of 2026 despite a fragile labour market and global uncertainty, supported by higher household spending and lower debt-servicing costs.

The data helped steady sterling, with the pound erasing a small decline to trade little changed against the dollar at $1.3442.

While November’s figures may allay immediate fears of a sharp downturn, the outlook remains finely balanced as policymakers and investors assess how fiscal tightening and global risks will shape the UK’s economic path in 2026.