The UK economy grew by a modest 0.1% in November, missing forecasts of 0.2%, according to data released by the Office for National Statistics (ONS) on Friday. While the figure marks a slight recovery from two consecutive months of 0.1% contraction, it underscores the ongoing challenges facing Britain’s economic recovery as Labour’s new government contends with high inflation, weak consumer confidence, and global trade uncertainties.

The disappointing GDP result caused a small dip in the value of the pound, which fell 0.10% against the dollar to $1.22 and 0.25% against the euro to €1.18. Despite the lackluster economic growth, the UK’s equity markets remained buoyant, with the FTSE 100 climbing by 1.1%, or 90.77 points, to 8,391.90, and the FTSE 250 up 1%, gaining 194.08 points to 20,527.70. Government bond yields remained flat, reflecting a mix of investor caution and optimism following a surprising drop in inflation earlier this week.

Chancellor Rachel Reeves acknowledged the modest progress but emphasized that more significant improvements would take time. The latest three-month data from the ONS revealed zero growth over the period leading up to November, further highlighting the difficult path ahead for the government.

Business sentiment remains cautious following Labour’s October budget, which introduced a £25 billion increase in national insurance contributions and £70 billion in additional government spending. Many businesses have warned that these measures could lead to job cuts and higher prices as they adjust to the new tax burdens.

Reeves defended her approach, insisting that her government has ended the “instability” caused by the previous Conservative administration. “This new government has come in with a determination, a No 1 mission, to grow the economy. That takes time,” she said, adding that she will meet with regulators to push for a stronger pro-growth focus ahead of the spring statement and the Office for Budget Responsibility’s updated forecasts in March.

Concerns about a potential trade war, fueled by the incoming US President Donald Trump’s pledge to impose tariffs on imports, also loom large. Business Secretary Jonathan Reynolds expressed unease about the possibility of a “tariff war between friends.”

Reeves also faces growing pressure to manage public finances carefully, with market borrowing costs rising. Speculation is mounting that the Chancellor may need to raise taxes or curb spending. However, Reeves remains committed to “rooting out waste in public spending” while prioritizing growth.

Optimism has emerged following an unexpected drop in inflation to 2.5% in December, with some analysts predicting that the Bank of England may soon begin lowering interest rates, currently at 4.75%. This could offer relief to borrowers, particularly those struggling with high mortgage costs.

Despite the slight growth in services, November’s figures highlighted weaknesses in other sectors. Construction saw a 0.4% rise, driven by commercial developments, but manufacturing and oil and gas extraction continued to struggle. Analysts caution that these figures do little to dispel concerns about a stagnant economy heading into 2025.

The OBR projects 2% GDP growth for 2025, although some experts consider this overly optimistic, given the potential risks of a trade war or additional global economic downturns. Reeves’ challenge is clear: delivering a robust economic recovery remains a formidable task. As HSBC analysts put it, “For a government that has said growth is its top priority, this is not great news.”

Dyson has announced the cancellation of its £100 million technical and research centre in Bristol, opting instead to consolidate its southwest operations at its flagship campus in Malmesbury, Wiltshire. This move will result in the relocation of 180 staff, originally slated for the new Bristol hub at 1 Georges Square, to the company’s main site, which also houses the Dyson Institute and its engineering degree programme.

The British technology company, renowned for its vacuum cleaners, hairdryers, and other household innovations, had revealed plans for the Bristol hub in 2023. However, Bill Wright, Dyson’s UK HR director, explained that consolidating teams in one location would foster greater collaboration in research and innovation. “As the pace of innovation accelerates, we increasingly see the benefits of having teams all located together in one physical location,” Wright said.

Dyson had already invested significantly in refurbishing the Bristol site but confirmed that 1 Georges Square will now be put up for lease. To assist staff with the relocation, Dyson will introduce a coach service and provide free electric car charging points to ease the impact of the move.

This decision follows a global review by the company, which last year prompted the announcement of potential cuts to up to a third of its UK workforce. The move also comes amid founder Sir James Dyson’s outspoken criticism of the UK’s economic policies, particularly Labour’s proposed tax hikes and national insurance increases. In a letter to The Telegraph, Dyson called out the Labour party, saying, “Why would anyone start a company in the UK? The hit delivered by Labour to business, and the destruction of British family-owned businesses especially, is an egregious act of self-harm.”

While Dyson insists that the closure of the Bristol site is a business-driven decision and not a political statement, the move highlights the company’s ongoing strategy of consolidating its operations. Dyson, which is now headquartered in Singapore, appears committed to focusing its innovation efforts at the historic Malmesbury campus, where the company was originally founded.

The decision to centralize operations at Malmesbury reflects Dyson’s broader strategy to streamline its research and development efforts, as the company continues to navigate challenges in the global market.

As the new year begins, businesses are being advised to review their finances and plan for the changes set to take effect in April 2025. With statutory increases to the National Living Wage (NLW), National Minimum Wage (NMW), and other statutory payments, companies need to prepare in advance for the additional costs.

Wage Increases: National Living and Minimum Wage

From 1 April 2025, both the National Living Wage (NLW) and National Minimum Wage (NMW) will see significant increases. The NLW for workers aged 21 and over will rise from £11.44 to £12.21 per hour. The NMW for those aged 18-20 will increase by 16.3%, from £8.60 to £10.00 an hour, the largest rise ever for this age group. Meanwhile, the NMW for workers aged 16-17 and apprentices will increase from £6.40 to £7.55.

This 16.3% rise for the 18-20 age group is intended to narrow the gap between the two wage categories, with the possibility of extending the NLW to this group in the future. The Low Pay Commission is expected to consult on how to achieve this change in 2025.

Employers are advised to audit their workforce and ensure that payroll systems are updated to reflect these new rates, particularly for employees who will benefit from the increases.

Statutory Payment Increases

Alongside wage changes, statutory payments will also rise starting 6 April 2025. The weekly rate for statutory maternity, adoption, paternity, shared parental, and parental bereavement leave pay will increase from £184.03 to £187.18. If an employee’s average weekly earnings are lower than the statutory rate, they will receive 90% of their average earnings.

Statutory sick pay (SSP) will rise from £116.75 to £118.75 per week. However, a more substantial change could be on the horizon. A consultation on strengthening SSP, which ended in December 2024, suggested that eligibility could be extended to low-paid workers and that the three-day waiting period for SSP might be eliminated.

National Insurance Contributions

In another change, employers’ National Insurance contributions (NICs) will rise from 13.8% to 15% from 6 April 2025. Additionally, the threshold for NICs will be lowered, meaning employers will start paying contributions on employee earnings from £5,000, instead of the current £9,100.

The increase in employers’ NICs, along with higher wage rates, has raised concerns about potential job losses or slower recruitment. There are also worries that businesses may pass on these increased costs to consumers, contributing to higher inflation. According to the Deputy Governor of the Bank of England, this rise in NICs could slow long-term wage growth.

Strategies for Businesses

To manage these changes effectively, employers are encouraged to review their budgets and explore ways to improve productivity. Proactive measures, such as identifying efficiencies and maintaining open communication with employees about upcoming changes, will be crucial. Businesses may also benefit from consulting legal or financial experts to ensure compliance with the new regulations and navigate the financial challenges ahead.