The week ahead 19 January 2026 - UK economy sees unexpected growth
What to watch out for in the UK economy and property market this week.
Most indicators have pointed to a slowdown for the UK economy in the run up to the Chancellor’s Autumn Budget, which happened at the end of November 2025. For this reason, it was a surprise that the GDP figures showed the economy had expanded by 0.3% on a month-on-month comparison in November, up from -0.1% in October and defying a consensus forecast of just 0.1%. The growth was driven by a rebound in activity for the Professional, Scientific and Technical and Information and Communication sub-sectors, both of which had contracted in October. There were also strong figures for the car industry, which saw a production surge during autumn 2025, as JLR re-opened its plants after a cyber attack in the summer.
Nor was this the only good news for the Chancellor. Last Friday, the 10-year gilt yield stood at 4.40%, down from 4.57% just a month ago. As recently as 2nd September 2025, it was 4.80%, and the 52-week high is just under 4.90%. The doubling of the Chancellor’s fiscal headroom has reassured the bond market, which is both bringing down the cost of servicing the national debt and lowering market interest rates. It should also ease pressure on property yields this year.
News last week of a grand jury subpoena regarding testimony to Congress by the US Federal Reserve’s Chair, Jay Powell, intensified concerns that the White House may be trying to erode the independence of the Fed. This could have implications for global investment, particularly as the Trump administration has been behind an intensification of geo-political risks in the past few weeks. We believe that more global investors will diversify their portfolios, reweighting in favour of other advanced economies. This could result in more investment capital deploying in the UK in 2026.
This week sees a lot of UK data released, spanning the labour market, inflation and retail sales. Overall, we expect the tone to be moderately positive, and are forecasting inflation slows and retail sales achieve year-on-year growth. However, survey evidence points to continued weakness in the labour market, through a combination of higher employment costs and increased use of artificial intelligence by firms. We believe the data for December 2025 will confirm this trend is continuing.
This week’s figures
TUESDAY 20 January
UK Unemployment Rate, November 2025
5.1% previous
5.2% forecast
Survey evidence continues to point to a soft labour market, and given the general uncertainty surrounding the economy in November last year, we are predicting a small rise for the unemployment rate.
WEDNESDAY 21 January
UK Inflation Rate, y-on-y, December 2025
3.2% previous
3.1% forecast
Inflationary pressures in the economy peaked in autumn 2025, and there is evidence that suggests high prices are now deterring customers. Therefore, our forecast is for inflation to have edged lower in December.
FRIDAY 23 January
UK Retail Sales, y-on-y, December 2025
0.6% previous
0.6% forecast
There have been some mixed signals on Christmas trading, with December 2025 footfall down, but solid results from some (but not all) major retailers. We are forecasting sales growth in December that is in line with the previous year.
