FICC Focus All Options Considered: Perception of UK's Outlook vs. Reality
Aug 26, 2025
Dan Hanson, Chief UK Economist at Bloomberg Economics, shares insights on the contrasting perceptions of the UK's economic outlook. He discusses the surprising growth amidst negative narratives, highlighting real wage increases and government spending impacts. The conversation turns to the challenges of productivity and investment, urging for increased public support. Finally, Hanson delves into the current state of the gilt market and the fiscal hurdles as the autumn budget approaches, providing a nuanced view of the UK's economic landscape.
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Services-Led Resilience In PMIs
- UK composite PMI has risen to its highest since last August, led by services indicating stronger near-term activity.
- Markets price limited near-term BOE cuts, creating asymmetric risk if growth weakens and the trough falls further.
Growth Outperformed Expectations
- UK GDP grew 1.1% in H1 2025, around 0.5% quarter-on-quarter, showing stronger-than-expected performance.
- This strength came despite headwinds from tariffs and higher employer NI, highlighting underlying resilience.
Wages Have Outpaced Prices Since 2019
- Nominal pay rose ~32% since end-2019 while prices rose ~28%, so real wages are roughly 4% higher over that period.
- That counters the narrative of a constant macro-level cost-of-living collapse despite distributional issues.