posted 18th October 2025
🇬🇧 UK Economic Update – Autumn 2025
By Finance Connect.UK
The UK economy is showing quiet resilience this year — holding its ground despite higher living costs, cautious consumers, and global uncertainty. While growth has slowed, the picture is far more stable than many expected at the start of 2025.
At Finance Connect.UK, we keep a close eye on the trends shaping your financial world. Here’s a simple overview of where things stand — and what it could mean for households and businesses in the months ahead.
Growth: Resilient but Slowing
After a solid start to the year, the UK economy is growing more gently.
GDP rose 0.7 % in the first quarter of 2025, stronger than forecast.
Growth cooled to around 0.3 % in the second quarter as consumers tightened spending and business investment slowed.
Most experts — including the IMF and Bank of England — now expect growth of about 1.2 % this year, followed by similar numbers in 2026.
Services continue to drive the recovery, while manufacturing and exports remain under pressure.
Inflation: High, but Heading Lower
Inflation is easing but remains above the Bank of England’s target.
As of August 2025, inflation stood at 3.8 %.
It’s expected to peak around 4 % before gradually falling back towards 2 % during 2026.
Energy prices, supply chain costs and wage increases have kept inflation sticky, but the overall direction is improving — good news for household budgets.
Interest Rates: Easing Cautiously
The Bank of England has started to reduce rates after two years of tightening.
The base rate is now 4.0 %, with the Bank signalling a careful approach to further cuts.
Most forecasts suggest one more small cut this year, with more meaningful reductions likely in 2026.
Lower rates should gradually bring relief to mortgage holders and support business lending next year.
Jobs & Wages: Cooling, Not Collapsing
The labour market remains steady, though some slowing is visible.
Unemployment is edging slightly higher as growth softens.
Wages are still rising, though not always keeping pace with inflation.
While some sectors are tightening belts, overall employment remains strong by historical standards.
Public Finances & The Autumn Budget
With the Autumn Budget approaching, the government faces tough fiscal choices.
Borrowing costs are high, and balancing public spending with debt management will be a challenge.
Economists expect:
Possible tax reforms or allowance changes,
A continued focus on raising revenue,
And a cautious approach to avoid stalling growth.
For individuals and businesses, it’s a reminder to plan ahead — particularly if new tax measures are introduced later this year.
Key Challenges
The UK’s outlook is stable but not without hurdles:
Low productivity continues to cap long-term growth.
Brexit trade frictions still weigh on exports.
Global uncertainty — energy markets, conflicts, and supply disruptions — adds volatility.
These factors mean recovery will likely remain gradual through 2026.
The Outlook: Cautious Optimism
The overall message is one of steady progress.
Growth is modest, inflation is easing, and interest rates are starting to fall. The economy is far from booming — but it’s on firmer ground than a year ago.
With careful planning and the right financial guidance, both households and businesses can navigate this period with confidence.
💬 Need financial clarity or expert advice?
At Finance Connect.UK, we can connect you with a trusted, independent financial adviser who’s right for your needs — whether you’re reviewing your mortgage, planning investments, or managing your retirement income.
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