FX.co ★ Deutsche Bank lifts UK growth outlook for 2026

Deutsche Bank has raised its 2026 GDP growth forecast for the United Kingdom to 1.2% from 1.1%, reverting to its assessment from a month earlier after stronger‑than‑expected economic data.

In a note published last Friday, the bank said it now expects the UK economy to avoid a contraction in the fourth quarter of 2025. The forecast implies 0.2% quarter-on-quarter growth instead of the previously anticipated decline. This revision followed upward revisions for earlier months and a marked rebound in GDP in November.

According to November data, the services sector recovered from a 0.3% decline in October, while industrial production rose by 1.1% from the previous month.

Services sector activity was supported by gains in leisure (0.9%), information and communications (1.6%), and professional services (1.7%). In the industry sector, an additional driver was a 25% jump in motor vehicle output as production in the auto sector returned to normal levels.

At the same time, construction showed signs of weakness, with output falling by 1.3% month-on-month in November, marking the second consecutive monthly decline.

Looking to 2026, Deutsche Bank highlighted a number of supportive factors for the UK economy, including slower consumer price growth. Inflation is expected to approach target levels by spring, boosting real disposable incomes.

Other positive factors cited by the bank include accommodative lending conditions, an anticipated cut in the Bank of England’s policy rate, increased public spending, and government deregulatory measures.

Deutsche Bank maintained its forecast for the Bank of England’s policy rate to end 2026 at 3.25%, down from the current 3.75%.