Economic Snippets From The Papers Today

16th October 2025

The UK economy grew by 0.1 % in August, helping reverse earlier weakness (with July revised down).
The Guardian
Reuters

But the quarterly growth over the three months to August was only 0.3 %, so the recovery remains fragile.
The Guardian

Inflation outlook, IMF warnings & interest rate risks

The International Monetary Fund (IMF) has warned that inflation in the UK may become entrenched, projecting the UK will have the highest inflation among G7 nations in 2025-26.
Financial Times

The IMF expects inflation of 3.4 % in 2025, then easing to 2.5 %.
Sky News

Because of persistent inflation, the Bank of England is likely to delay interest rate cuts until 2026 even as economic growth remains subdued.
Financial Times

Energy bills and infrastructure costs threaten household budgets

Major energy firms are warning that non-commodity costs (grid upgrades, decarbonisation charges, regulatory levies) could push household bills up by ~20 % over the next four years—even if wholesale energy costs drop.
The Guardian

These rising structural costs complicate government promises to reduce energy bills.
Financial Times

Mortgage defaults fall — signs of easing stress

In Q3 2025, UK mortgage defaults saw their first decline since 2022, easing pressure on households.
Financial Times

Credit availability is rising, and business loan demand is improving.
Financial Times

Government's takeover of British Steel costs rise

The cost to the taxpayer of nationalizing British Steel has climbed to £235 million, covering debts, unpaid supplier bills, salaries, and raw materials.
The Guardian

The government is keen to bolster UK steel output, but faces risks from potential EU import tariffs which could affect competitiveness.
The Guardian

Push for pharma investment & industrial strategy

Finance Minister Rachel Reeves reiterated that the UK wants to attract more pharmaceutical investment, urging foreign drug-makers to commit more to the UK.
Reuters

This comes amid criticism that the UK's business climate has become less attractive for some global firms.

Market / Financial Reactions & Trends

Exchange Rates / Sterling (GBP)

Sterling has strengthened, hitting its highest level in over a week against the U.S. dollar (around $1.3443) as markets increasingly price in a more dovish U.S. Fed outlook, which softens dollar strength.
Reuters

The GBP/USD pair is trading in the ~1.3394-1.3443 band.
Investing.com

Some of the upside is also tied to internal UK dynamics: slightly better growth, reduced gilt yields, and potential clarity ahead of the budget.
Reuters

Bond / Gilt Yields & Spreads

Yields on 10-year UK gilts have been hovering around 4.66 % in recent sessions.
Trading Economics

The UK vs U.S. 10-year spread is about 39.6 basis points (UK yield ~4.66 % vs U.S. ~4.05 %)
Investing.com UK
Trading Economics

Government borrowing costs have declined somewhat after Chancellor Reeves' comments on fiscal discipline, which helped calm markets.
The Guardian

However, longer-term and ultra long-term yields remain under upward pressure due to structural debt concerns and investor risk premiums.
Bloomberg
Reuters

Equities / Stock Markets

The FTSE 100 and broader UK equity markets are under modest pressure overall, as investors balance slow growth, inflation risks, and uncertainty in fiscal policy.
Trading Economics
Hargreaves Lansdown

Some sectors—especially energy, mining, or defensive names—are attracting interest due to inflation hedging or commodity tailwinds.
Trading Economics

Investor appetite is cautious ahead of the UK's Autumn Budget (scheduled for late November), which could alter tax, spending, and regulation expectations.
The Guardian

Interpretation & What to Watch

The stronger pound, falling gilt yields, and softening borrowing costs suggest markets are getting more comfortable that the UK might manage its fiscal trajectory — but risk is elevated if the upcoming budget surprises.

The UK-U.S. yield spread is supportive for sterling, but any surprise shift in U.S. rates (e.g. hawkish Fed) could reverse some gains.

Equities will likely remain volatile: they're sensitive to inflation prints, central bank signalling (especially from the Bank of England), and budget announcements.

Longer-dated yields and the debt premium remain a focus: markets will keep monitoring whether investors demand higher compensation for UK sovereign risk.