For the data behind the commentary, download the full December 2025 UK Economy & Housing Report.
IT’S THE END OF THE YEAR AS WE KNOW IT…
After much forbearance and market chatter, the markets moved past the Autumn Budget unscathed. Our initial reaction to the impacts on real estate can be found here.
While there is some fiscal upside to the Budget that will likely translate into growth during 2026, the biggest upside may be that it is now behind us. The Flash Composite PMI suggested a significant uptick in business confidence, rebounding from 51.2 in November to a preliminary 52.1 in December, with construction, manufacturing and services all improving. The initial take on the survey would be that businesses now have the certainty needed for business decision-making, at least in the short term.
Despite the uptick in business confidence, this should not be seen as a sign of strong economic growth. GDP fell by a further 0.1% in October, after a 0.1% fall in September. Manufacturing started its recovery after the impact of the JLR cyber attack, but services output fell by 0.3%. Two months of negative GDP growth, slowing wages, and a softening labour market all likely underpinned the MPC decision to cut basis points by 25 basis points.
This was likely rubber stamped by inflation surprising on the downside in November, with CPI falling from 3.6% in October to 3.2% in November. This was welcome news. In the last meeting, the Governor Andrew Bailey had suggested he needed more evidence of inflation falling, and that has now happened. The inflationary pressures should continue to subside, as a result of falling energy costs and decreased food costs.
AND SO TO 2026…..
After a rollercoaster year, and so we move onto the next. If you haven’t had a chance yet, please do take a look at our European Outlook for 2026, while in the new year, we launch VISIONS – our view of the key themes and trends impacting real estate during 2026.
