The week ahead 03 November 2025 - Budget speculation intensifies
What to watch out for in the UK economy and property market this week.
Last week saw media reports that the UK Office for Budget Responsibility is preparing a large reduction for its productivity forecasts, which the Treasury must use for preparing the autumn budget, which is due on 26th November. This could potentially mean the Chancellor might have to raise an additional £20 billion to meet her fiscal rules, necessitating major tax increases and spending cuts. The messaging from the government appears to be that they do plan to follow through on an austerity budget. At Prime Minister’s Questions last week, Keir Starmer refused to rule out an increase in either income tax, national insurance or VAT. Earlier in the year, the Prime Minister had in Parliament unambiguously rejected raising those taxes.
Tax hikes and government cuts will impact growth going forwards, particularly in April of next year when many of the budget measures will probably be implemented. However, the bond market is taking comfort from the government maintaining fiscal discipline. The ten-year gilt yield stood at 4.42% on Friday afternoon, down from 4.76% a month earlier. Ultimately, lower market interest rates should create a firm foundation for economic growth over the medium- to long-term.
Last week saw some good news for UK manufacturing, with the announcement of an £8 billion order by Turkey to purchase 20 Eurofighter Typhoon jets. Around 37% of the production will take place in the UK, and the order will generate supply chain work for other manufacturers. This follows the recent £10 billion order by the Norwegian navy for warships to be built in Scotland. This shows the UK defence, aviation and engineering industries are gaining from the rush to re-arm in Europe.
The Euro Area has reported Q3 GDP growth of 0.2%, up from 0.1% in Q2. Interestingly, France saw its economy expand by 0.5%, up from 0.3%, which contrasted with the German and Italian economies flatlining. France’s GDP data is a reminder that rollercoaster politics do not necessarily result in poor economic growth.
This week will see the Bank of England announce its interest rate decision, following cuts of 25 bps each last week from the US Federal Reserve and the Bank of Canada. Also, the Euro Area will release data this week on retail sales, while in the US, figures on redundancies are out.
We are forecasting the Bank of England Monetary Policy Committee (MPC) will leave the Base Rate on hold at this week’s meeting. However, inflation came in below expectations in the latest figures, so we believe the MPC will use the minutes and press conference for the November meeting to hint at an upcoming reduction at the December meeting.
This week's figures
Thursday 6 November
Euro Area Retail Sales, y-on-y, September
1.0% previous
1.2% forecast
Thanks to lower interest rates, and signs of momentum in the economies of some countries within the bloc, we are predicting stronger growth in September.
Thursday 6 November
Challenger US job cuts, October
54.1k previous
60.5k forecast
A number of major US corporations have announced redundancies lately, with Trump’s tariffs and investments in Artificial Intelligence cited as reasons. We are forecasting a rise in layoffs will be reported for October.
Thursday 6 November
Bank of England Interest Rate Decision, November
4.00% previous
4.00% forecast
Typically, policymakers like to signal to the markets in advance that an interest rate cut is coming, in order to limit volatility. We believe rates will be left on hold at this meeting, which will be used to indicate a reduction is in the pipeline for December.
