The week ahead 01 December 2025 - Financial markets cautiously welcome Buget
What to watch out for in the UK economy and property market this week.
Wednesday afternoon last week saw the 10-year gilt yield edge downwards, while the pound rose against the US dollar, as the financial markets gave a cautious nod of approval to the Chancellor’s Autumn Budget. After having had more time to examine the details behind the speech, there was a small rise in Gilt yields on Thursday, but trading finished with them still lower than where they opened on Wednesday morning. This was in marked contrast to what happened following the 2024 Autumn Budget, when gilt yields increased markedly. The difference this time is that the Chancellor reported she had doubled her projected fiscal headroom, reassuring the markets that the government is serious about financial discipline.
The increases in taxes seen in the Budget look set to dampen consumer spending power. There were, though, some measures to lessen the impact on households, such as a freezing of rail fares in England, and the rise in the national minimum wage – although the cost of this might get passed on to consumers through higher prices. However, in part, the Chancellor is now relying on the Bank of England to help consumers through future cuts to the Base Rate, and we believe that will happen next month, as we are forecasting a 25 bps reduction at the December policy meeting. We are also predicting cuts of a further 50 bps next year.
The Chancellor is also relying on measures announced earlier this year in the Spending Review – including £113 billion of infrastructure investment and £86 billion of spending on research and development – to boost the economy in 2026 and 2027. This is why we believe GDP growth in the coming months and years will be led by businesses, not consumers. That will be good news for real estate that serves businesses, like industrial property, offices and lab space.
So, with the financial markets appeased and the Bank of England expected to help boost growth going forward, we feel the 2025 Autumn Budget overall was good for the economy. Our full analysis of the Budget can be found here.
This week sees the release of the final draft of the UK composite PMI index for November. The early draft came out before the Budget. Given that the final version will contain some surveys that were completed after the Budget, it will be interesting to see if there is a significant revision, either upwards or downwards, which might give us an idea of how businesses feel about the Chancellor’s plans.
This week's figures
Wednesday 3 December
UK Composite PMI (final), November
52.2 previous
50.5 forecast
In the early draft of the UK composite PMI, the index fell from 52.2 in October to 50.5 in November, with Budget uncertainty probably a factor. It will be interesting to see if the later survey returns saw any post-Budget boost.
Friday 5 December
US PCE Inflation, y-on-y, September
2.7% previous
2.8% forecast
This is the measure of US inflation that the Federal Reserve uses as its benchmark for rate setting. We are forecasting a small rise due to less downwards pressure from gasoline prices on the annual comparison.
