For the data behind the commentary, download the full October 2025 UK Economy & Housing Report.
“You gotta have faith"
When looking at the economy and even the way the data is being reported, at present, to paraphrase George Michael, “you gotta have faith.”
Firstly, there’s having faith in the data. The most recent data error has been through the undercounting of VAT income to the tune of £2 billion. In this case, finding an extra £2 billion down the back of the proverbial sofa is no bad thing and means that the current £62 billion public sector deficit is ever so slightly better than once feared.
This is another addition to a series of data issues from the ONS – particularly with regards to labour data, but also on inflation, retail sales and trade - that further erodes trust in data, that will impact decision making. There are no stones being cast here (I can assure you!), and there is new leadership at the ONS but trust in data is important for decision-making, particularly at the margins.
The second area of faith needed unfortunately comes in the outlook for the economy and the impacts from the long-signposted Autumn Budget. In reality, the VAT income amend has little impact on the tightening required to find up to £30 billion in the budget as a result of higher yields, the backtrack on welfare reforms, and weaker than forecasted productivity growth.
The Chancellor is an unenviable position. One of the options she has is to increase the amount of headroom. However, this could impact the financial markets, and there is no guarantee that the UK is not back in the same position not long after.
Unfortunately, and it should go without saying, but needing to have faith is not good for business. After a boost in PMI in July, the UK Composite PMI fell from 53.5 in August to 50.1 in September. This is the weakest reading since tariffs hit, with plenty of citations of uncertainty.
While the decision to push back the Autumn Budget to late in the year was a pragmatic one – in the hope that a more positive picture would emerge; in reality, the spectre of increased tax rises will hang over decision-making for businesses and investors in real estate until there is clarity.
