Table of Contents
Top Headlines
- Bank of England holds interest rates at 3.75% but signals that borrowing costs could rise if energy-driven inflation persists.
- UK productivity estimates revised higher, with a new ONS methodology showing average annual output-per-hour growth of 1.3% between 1997 and 2024.
- Bank of England pauses some gilt sales while setting out a longer-term plan for reducing its government bond holdings.
- UK autumn weather remains unsettled, with rain and strong winds expected in several regions.
- Government prepares for the October 28 Budget, with tax policy and the economic outlook among the key issues in Westminster.
- London and southeast England could see warmer conditions, with temperatures around 22°C in London on Thursday.
UK News Today
The UK is facing a closely watched economic period as the Bank of England keeps its benchmark interest rate at 3.75% while warning that persistent energy-price pressures could require tighter monetary policy. Six members of the Monetary Policy Committee voted to maintain the rate, while three supported a 0.25 percentage-point increase to 4%. Governor Andrew Bailey said prolonged global energy-market volatility could make it harder for inflation to return to the Bank’s 2% target.
Inflation and household costs remain important issues for the UK economy. The Bank expects inflation to rise further if higher energy costs continue to feed through to prices. Financial markets are therefore watching upcoming policy meetings closely, particularly as policymakers balance inflation concerns against a weaker labour market.
UK Economy and Productivity
New data from the Office for National Statistics (ONS) provide a more positive assessment of Britain’s long-term productivity performance. Using an experimental methodology that incorporates tax data and employer information, the ONS estimates average annual growth in output per hour at 1.3% from 1997 to 2024, compared with 1.1% under its previous approach.
The revised figures suggest output per hour was almost 41% higher in 2024 than in 1997, compared with 34% under the previous measurement. The ONS said the new methodology does not change estimates of overall economic growth and is expected to replace the existing productivity statistics from November.
Bank of England and Government Bonds
The Bank of England has also changed aspects of its quantitative-tightening plans. The central bank paused sales of British government bonds for six months and stopped selling long-dated gilts as part of a revised strategy for reducing its remaining holdings. Reuters reported that the Bank has around £488 billion of gilts remaining and plans to unwind most of the holdings over several years.
The move comes after UK long-term borrowing costs reached their highest level since 1998, highlighting continued sensitivity in Britain’s bond market. Government borrowing costs will remain an important issue as the Treasury prepares for the autumn Budget.
UK Politics and October Budget
Westminster is also focused on the government’s upcoming October 28 Budget. Political debate is centered on taxation, public finances, small businesses and the wider cost-of-living environment. Sky News reported that shadow chancellor Andrew Griffith is urging the government not to raise taxes on small businesses, while Chancellor John Healey is continuing preparations for the Budget.
The economic backdrop—including inflation, interest rates, government borrowing and productivity—will be closely watched ahead of the Budget.
UK Weather Today
The Met Office forecasts a changeable and windy period across the UK. Rain affecting southeast England on Thursday is expected to clear during the afternoon, while showers will continue in western and northern Scotland. Northern and western areas are expected to experience the strongest winds, with a possibility of coastal gales around northern Scotland.
In London and southeast England, Thursday begins cloudy and damp before conditions become drier later. London could reach around 22°C, while Friday is expected to remain relatively mild before further cloud and rain develop
