Politics – including the US election and the ongoing fallout from October’s Budget – absorbed much of the limelight in the UK during November. The Bank of England warned of mounting risks to the UK’s financial system, including geopolitical instability, pressure on government debt levels, and the prospect of trade wars.
- Business groups warned that measures from the Budget could harm businesses
- The BoE cut its key rate to 4.75%
- CPI reached its highest level YoY since April
Power plays: politics – including the US election and the ongoing fallout from October’s Budget – absorbed much of the limelight in the UK during November. The Bank of England (BoE) warned of mounting risks to the UK’s financial system, including geopolitical instability, pressure on government debt levels, and the prospect of trade wars. Nevertheless, UK equity indices rose over the month, partly boosted by corporate activity in the insurance sector. The FTSE 100 Index rose by 2.2%, while the FTSE 250 Index climbed by 1.9%.
“The rate of unemployment increased sharply”
Budget fallout: following a dip in October that was widely attributed to Budget-related uncertainty, consumer confidence strengthened in November, according to GfK. However, there are concerns that some of the measures in the Budget – including the increase in employers’ National Insurance contributions – could be undermining business sentiment. The Confederation of British Industry reported that almost two-thirds of UK companies that responded to its post-Budget survey believe the Budget will damage UK investment. Meanwhile, 82 UK retailers, alongside the British Retail Consortium, sent a letter to Chancellor Rachel Reeves warning that the “cumulative burden” of measures contained in October’s Budget will lead to higher prices, “inevitable” job losses, and shop closures.
Pension reforms: in the annual Mansion House speech, Rachel Reeves announced plans for major pension reforms. These focus on consolidating 86 Local Government Pension Schemes into eight “megafunds” in a move designed to boost for UK investment and deliver better outcomes for savers.
Inflation ticks up: as expected, BoE policymakers cut the base rate1 from 5% to 4.75%, but warned6 that measures in the Budget were likely to stoke inflationary pressures. Higher energy prices pushed the annualised rate of inflation from 1.7% in September to 2.3% in October, reaching its highest level since April and dampening hopes of another imminent rate cut. Inflation in the services sector increased to 5% and core inflation rose from 3.2% to 3.3%.
Lacklustre growth: having expanded by 0.5% during the second quarter of 2024, the UK economy grew by only 0.1% in the third quarter as activity in the services sector lost pace against a backdrop of uncertainty ahead of the Budget. The rate of unemployment rose to 4.3% in the third quarter, and vacancies continued to fall. Average earnings (excluding bonuses) rose at an annualised rate of 4.8% during the period, representing their slowest growth since mid-2022.
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