The week ahead 02 February 2026 - UK car industry finishes a difficult 2025 on a high note
What to watch out for in the UK economy and property market this week.
Data released last week from the Society of Motor Manufacturers and Traders confirmed that 2025 had been a tough year for British carmakers, but output in December was encouraging.
2025 saw nearly 765,000 cars and commercial vehicles made in the UK, which was down -15.5% on 2024. Last year, saw a lot of setbacks for the automotive industry, with the Trump tariffs controversy in the spring, and the cyber attack on JLR during the summer. Also, new car models were launched, which involved shutdowns as factories retooled. However, the above were all exceptional circumstances, and not signs of any underlying weakness, which bodes well for production in 2026.
An encouraging sign was the 6.1% rise on an annual comparison for December 2025 production, with over 55,000 vehicles produced. This is the latest in a run of indicators pointing to a strengthening of the UK economy in December and January. The news is also encouraging for real estate, given the car industry and its supply chain are major occupiers of industrial space.
UK households borrowed less in December 2025, with new consumer loans declining to £1.5 billion, down from £2.1 billion in November. Consumer borrowing is a volatile statistic, and difficult to judge – a decline could point to either consumer caution or households being financially strong enough to fund purchases without having to borrow.
The price of gold fell by 8.4% last Friday, as investors moved away from the safe haven investment. The correction was prompted by President Trump nominating Kevin Warsh to become the next Chair of the US Federal Reserve. Mr Warsh has been a Fed rate setter before, and is regarded by Wall Street as someone who would resist pressure from the White House.
This week sees interest rate decisions from the Bank of England and the ECB. We are not expecting interest rates to change this week for either of these central banks, but for different reasons.
For the ECB, interest rates appear to be at the right level for now, given inflation at 1.9% in December 2025 was close to target, while GDP growth at 1.3% for 2025 was slightly stronger than expected. So, there is not much of a case based for any change to interest rates.
The Bank of England cut its policy rate in December 2025, but since then we have seen higher-than-expected inflation data. However, the Bank’s current forecast is for inflation to decelerate in 2026, so rate setters will, in our opinion, want to see more data, both on inflation and GDP growth, before making any decisions. We are, though, expecting two 25 bps Base Rate cuts from the Bank of England over the course of 2026.
This week's figures
Thursday 5 February
Bank of England Base Rate Decision, February 2026
3.75% previous
3.75% forecast
No change is expected at this meeting, after the inflation figure for December 2025 came in higher than expected. So, we believe the Bank of England will choose to hold fire and monitor the data in the short-term.
Thursday 5 February
ECB Interest Rate Decision, February 2026
2.15% previous
2.15% forecast
With inflation close to target, and GDP growth holding up reasonably well, the ECB is not facing any pressure to alter its policy interest rate. We are forecasting no change.
Friday 6 February
US Non-Farm Payrolls, January 2026
50k previous
45k forecast
The payrolls data has been relatively weak in recent months, which we believe reflects firms choosing to use AI more. Recent news has reported layoffs by major corporations. We are predicting a slower rate of growth for payrolls in January.
