Deutsche Bank raised its UK GDP growth forecast for 2026 to 1.2%, reversing a prior cut. The bank now predicts a 0.2% expansion in the fourth quarter of 2025, abandoning earlier fears of a contraction. This revision follows stronger-than-expected November data, which showed a rebound in services and production output.

The services sector recovered from October's dip, led by leisure, information, and professional services. A 25% surge in motor vehicle production also lifted the manufacturing sector. However, construction output fell for a second straight month, highlighting uneven momentum across industries as the economy navigates post-pandemic adjustments.

Deutsche Bank points to several tailwinds for 2026, including falling inflation, anticipated Bank of England rate cuts, and increased public spending. The bank expects the central bank's rate to fall to 3.25% by year-end. These factors could boost real disposable incomes and support credit conditions, though global uncertainties remain a key risk.