The week ahead 22 September 2025 - Bank of England slows gilt sales
What to watch out for in the UK economy and property market this week.
Last week saw central banks in major economies taking divergent paths. The US Federal Reserve and the Bank of Canada cut their policy interest rates by 25 bps each, but the Bank of England left rates unchanged. This follows the ECB leaving interest rates on hold earlier in the month. The divergence in approach reflects greater concerns about growth prospects in North America than is the case in Europe.
The Bank of England said the amount of gilts it plans to sell from its balance sheet in the year ahead, as it withdraws the printed money issued during the Covid pandemic, would be reduced from £100 billion to £70 billion. Lately, yields have softened for long-dated government bonds around the world, so the Bank’s move should reduce some of the pressure on long maturity gilt yields. This is positive news for property yields. Our full analysis of the Bank of England Base Rate decision can be found here.
Data released last week increased the likelihood the Autumn Budget may contain significant austerity measures. Figures showed government borrowing is running higher than the OBR predicted in the spring. The government borrowed £83.8 billion between April and August, compared to an OBR forecast of £72.4 billion.
UK retail sales in August saw volumes rise by 0.5% month-on-month, but the three-month growth rate was down by -0.1%. Clothes stores, butchers and bakery shops, and online shopping were the main drivers of the rebound for month-on-month growth. There was probably also some ‘back to school’ spending boosting the figures.
In other news, last week saw US firms pledge to invest £150 billion in the UK over the next decade. The investment will span AI infrastructure, nuclear power and funding for tech start-ups.
This week sees provisional ‘flash’ PMI indices published for most of the leading economies, including the UK.
The convention of the PMI index is that a reading over the 50 mark indicates growth for the commercial side of the economy. For the UK, the August composite figure at 53.5 was punchy, and ahead of the consensus forecast. So, we are expecting a step back from that strong number, but to a level still well above the 50 mark. We are also predicting another month below 50 for the UK manufacturing PMI, given recent disruption in the car industry and its impact on the automotive supply chain. Presently, the UK economy is relying heavily on the services sector – and business services in particular – to drive growth.
This week will also see a large number rate setters from leading central banks, including the Bank of England, US Federal Reserve, and the ECB, give speeches. This should provide some clues on how policymakers view the outlook for interest rates.
This week's figures
Tuesday 23 September
UK 'Flash' Composite PMI, September
53.5 previous
52.9 forecast
The August figure for the UK surprised commentators with its strength, although recent business news has had a more subdued tone, so we are predicting a slight decline in September; albeit to a number well above the 50 mark.
Tuesday 23 September
Euro Area 'Flash' Composite PMI, September
51.0 previous
51.0 forecast
Calling the Eurozone PMI is clouded by the very different levels of economic performance being seen around the bloc. Overall, we believe little has significantly changed since August, so are predicting a similar PMI reading.
