THE UK economy grew in November in a surprise boost for Rachel Reeves.
The Office for National Statistics (ONS) said Gross Domestic Product (GDP) went up by 0.3% in November.
The news comes after the economy slumped by 0.1% in October and fell by 0.1% in September.
The ONS said that services grew by 0.3% and production increased by 1.1% but construction fell by 1.3%.
Liz McKeown, director of economic statistics at the ONS, 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 particularly offset by a fall in manufacturing, where three-month growth was still affected by the cyber incident that impacted car production earlier in the autumn.
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“However, data for the latest month show that this industry has now largely recovered.”
GDPis one of the main indicators used to measure the performance of a country’seconomy.
When it goes up, it means the economy is doing well. When it falls, it means the economy has shrunk.
Figures published today show that real GDP is estimated to have grown by 0.1%, after showing no growth in the three months to October.
Alice Haine, personal finance analyst at Bestinvest, said: “The positive GDP data will deliver some relief for Chancellor Rachel Reeves at the start of the year.”
But she warned that the struggling labour market continues to be a big threat after signs that businesses will continue to curtail their hiring plans for the year.
Although she said inflation is believed to have peaked and is expected to edge downwards over the course of 2026.
She added that while growth is subdued and the jobs market is stuttering, there is scope for further interest cuts this year.
The Bank of England (BoE) has made six cuts since August 2024 in a boost for borrowers and a further cut, as soon as February could help borrowers with heavy debt or mortgage payments.
Responding to the figures, a Treasury spokesperson said there’s more to do to drive growth, deliver the consolidation to provide stability, keep inflation low and stable, tackle the cost of living and bring our borrowing costs down.
They 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.
“At the same time, we are taking action to get bills and inflation down – with £150 off energy bills, rail fares, prescription charges and fuel duty all frozen, the two-child benefit cap lifted, alongside the national living wage to deliver an economy that works for working people.”
What it means for your money
GDP measures the economic output of companies, individuals and Governments.
If it is rising steadily, but not too much, it’s a sign of a healthy and prosperous economy.
This is because it usually means people are spending more, the Government gets more tax and businesses get moremoneywhich then means pay rises for workers.
When GDP is falling, it means the economy is shrinking which can be badnewsfor businesses and workers who face pay cuts or even losing their job.
TheBank of England(BoE) also uses GDP andinflationas key indicators when determining the base rate.
This decides how much it will charge banks to lend them money and is a way to try to control inflation and the economy.
If GDP is low, the BoE cuts its base rate in order to encourage people to spend and invest money.
If it is higher, the BoE may keep its base rate higher in order to keep inflation in check.
Deutsche Bank’s chief UK economist Sanjay Rajasaid: “Inflation looks set to drop meaningfully – even reaching near target by spring, boosting real disposable incomes.
“Easy credit and financial conditions will also be supportive of growth. And policy will grease the wheels of the economy, with more Bank of England rate cuts likely through the year.”
What is the base rate and how does it affect the economy?
NINE members of the Bank of England’s Monetary Policy Committee meet eight times each year to set the base rate.
Any change to the Bank’s rate can have wide-reaching consequences as it directly influences both:
- The cost that lenders charge people to borrow money
- The amount of savings interest banks pay out to customers.
When the Bank of England lowers interest rates, consumers tend to increase spending.
This can directly affect the country’s GDP and help steer the economy into growth and out of a recession.
In this scenario, the cost of borrowing is usually cheap, and the biggest winners here are first-time buyers and homeowners with mortgages.
But those with savings tend to lose out.
However, when more credit is available to consumers, demand can increase, and prices tend to rise.
And if the inflation rate rises substantially – the Bank of England might increase interest rates to bring prices back down.
When the cost of borrowing rises – consumers and businesses have less money to spend, and in theory, as demand for goods and services falls, so should prices.
The Bank of England is tasked with keeping inflation at 2%, and hiking interest rates is a way of trying to reach this target.
In this scenario, the losers are those with debt.
First-time buyers will lose out to cheaper mortgage rates, and those on tracker or standard variable rate mortgages are usually impacted by hikes to the base rate immediately.
Those on a fixed-rate deal tend to be safe if they fixed when interest rates were lower – but their bills could drastically increase when it’s time to remortgage.
The cost of borrowing through loans, credit cards and overdrafts also increases when the base rate rises.
However, the winners in this scenario are those with money to save.
Banks tend to battle it out by offering market-leading saving rates when the base rate is high.