# Roundup of the week: 28 November 2025 _Markets bounced back this week, the UK budget landed with fewer surprises than expected, and—despite the political theatre—nothing in the Chancellor’s plans alters my upbeat outlook for 2026 and beyond._ Neil Woodford · 28 November 2025 · 11 min read ![Roundup of the week: 28 November 2025](https://cdn.sanity.io/images/v3acfbvo/production/ccb5e0ee826160ef2ba44b7fa9e08bda36f44c62-2100x1400.jpg?w=1600&fit=max&auto=format) --- **If you think we have missed something you would like to discuss or would like to send in a question for next week's podcast episode,** [**send us an email**](mailto:hello@noisecancelling.co)**.** This week, financial markets have, on the whole, recovered from last week's sell-off. It’s hard to know what has motivated this more positive tone, but more dovish commentary by members of the FOMC may well have helped sentiment, as has yet another concerted peace-making effort in Ukraine. Whether this latest initiative will yield a positive outcome is unclear, given that, at the moment, Russia’s terms for a ceasefire appear unacceptable to Ukraine and, most significantly, to the US’s European and UK allies. One other positive development was the announcement that President Trump will visit Beijing in April next year and that the US will host President Xi later in the year. ## Politics ### UK Budget This week, the most significant political event was the UK budget. The usual grandstanding in the House of Commons was quite entertaining, but broadly the measures announced in the speech were not that much of a surprise, not least because in a fitting end to what I have previously described as an omnishambles, the OBR released the 200-page budget document about an hour before the Chancellor stood up to deliver it. I will cover its principal measures below, but suffice to say here that there was nothing in the speech that would lead me to alter my underlying upbeat view of the UK economy's outlook in 2026 and beyond. Interestingly, after an initial gyration at the start of the speech, the UK gilt market rallied, and by Wednesday's close, yields on 10-year gilts had fallen to 4.43%, close to where they had been before last week’s sell-off. Here is a brief list of the key points emanating from the Chancellor’s second budget speech. 1. The OBR upgraded both its 2024 growth outcome figure and its 2025 forecast, which was increased by 0.5% to 1.5%, bang in line with what I have been saying for most of this year. 2. The OBR projections in the budget put UK growth averaging 1.5% over the medium term, a 0.25% pa reduction on the Spring forecast. This reduction, which had been flagged for months, was a direct product of the OBR’s downgraded productivity growth forecast over the medium term (from 1.3% pa to 1% pa). 3. Despite this downgrade, the way this absurd process works means that upgrades to the starting GDP in 2024 and 2025 result in the nominal economy being £40bn bigger in 2029/30 than the OBR had forecast back in the Spring. 4. As predicted, the budget does increase taxes, but the impact of the higher taxes is very back-end loaded over the forecasting period. This, I believe, is a deliberate decision (more on this below), but the planned increases amount to £26bn in 29/30 (not far off the number I expected pre-budget and nowhere near the stupid NIESR, media horror numbers of up to £50bn). Taxes will actually increase by £38bn that year, but £12bn of that figure is due to a bigger economy than the OBR forecast in the Spring. 5. The tax-raising measures the Chancellor announced were pretty much in line with expectations, apart from the 2% additional levy on income from investments (property, cash savings, and dividend income), which was a surprise to me. On top of the extra CGT announced at the last budget, this was another explicit attack on saving and investment, along with reduced limits on the amount that can be put aside each year in cash ISAs. 6. Government spending is higher over the period and ends up in 2029/30, £32bn above the OBR forecast in the Spring. The forecast for spending in the current tax year is £23bn higher than the Spring forecast. Tax receipts are also higher, but only by £2bn, and so the deficit is £21bn higher as a result. £6bn of this £23bn overshoot is the product of the abandoned welfare reforms, and £6bn is the product of higher spending by local authorities, which no one at the moment seems able to explain 7. For all the jumping up and down about out-of-control welfare budgets (which I do have sympathy with), half of the increase in the welfare budget is a product of the increasing cost of the state pension – more people retiring, triple lock, increasing longevity. 8. Perhaps the oddest thing of all in all the melange of numbers and changes is the OBR’s forecast for business investment over the period. Interestingly, the OBR has had to upgrade its forecast for overall investment (public and private) by 2% to 2.75% this calendar year, but going forward, very strangely, the OBR has business investment falling in 2026 by 0.4% and then only growing by 1% pa thereafter (all in real terms). It would appear that the OBR has not been swayed by the fact that it has underestimated investment activity this year by a significant margin (so far this calendar year, business investment is up over 6% in nominal terms). I can only presume that it believes that the AI industrial revolution and all of the investment activity that goes with it will completely pass the UK economy by. Bonkers. 9. The current budget (before investment spending) is projected to move into surplus in 2028/29 and to exceed £20bn in surplus in 29/30. This is just over £10bn more than in the forecast in the Spring Statement. 10. Public sector net financial liabilities are forecast to peak at 83.7% of GDP in 28/29 and to fall marginally to 82.2% in 29/30. 11. Having learned in part the lessons from her previous budget, this one did include some measures (like freezing rail fares, fuel duty until next September and prescriptions and removing some green levies from consumer energy bills) that will be helpful for inflation going forward, which I see falling close to the MPC’s target by the second half of next year. 12. This removal of green levies might actually be the most significant surprise measure in this budget. It will remove £150 from household energy bills next April and will take something like 0.3% off the CPI. 13. There are some spending cuts embedded in the forward assumptions (about £6bn), mainly coming from so-called efficiency savings and reductions in fraud and error, apparently. ![Roundup of the week: 28 November 2025](https://cdn.sanity.io/images/v3acfbvo/production/0a7a91049000cad942e37f1b6aaf25cf8d3e2c76-1238x720.png?w=1600&fit=max&auto=format) The summary numbers, which might help you understand the underlying movements, are as follows. - The OBR assumes nominal GDP growth of 3.5% pa over the period. (3.75% in March forecast) - Government spending increases by 3% pa over the period. (unchanged) - Taxes increase by 4.5% pa over the period, up from 4% pa in March. - If the OBR had not reduced its growth forecast and it had remained at 3.75%, the current budget surplus in 29/30 would be £47bn. My observations and conclusions Rachael Reeves has done her party’s bidding and delivered another tax-and-spend budget. In some respects, I suppose, we should not be surprised, given that this is what Labour governments do. As a result of her two budgets, tax revenue will be about £80bn higher by 2029/30, meaning the tax share of GDP reaches 42.3% by 2029/30, up from 41.7% in the same year in the Spring forecast. It has not been that high since 1981/82. Having said that, despite the messy politics, talk of broken promises, missed opportunities, leaks and the final OBR omnishambles, I won’t be changing any of my forecasts for the UK economy in the short or medium term. This is because I don’t believe this budget will derail the fundamental underlying drivers of growth in the economy which will come from higher government spending (I wish this were not so), strong continued growth in business investment which builds on the momentum seen this year, and finally and most significantly, as inflation and interest rates continue to fall households will save less and spend more. In this sense, the budget is, as I have already said, pretty irrelevant to the economy. This may seem like an extraordinary thing to say, but the reality is that very little has changed as a result of all the hot air surrounding this annual jamboree. Growth will accelerate next year to 2%, and that momentum will build in my view in 2027. In fact, given that many of the measures in this budget are designed to increase taxes on savings or to reduce the incentives to save (by lowering the limit on cash ISAs), these may well act to disincentivise saving and, by definition, lead to more spending. Shock, horror, this might actually have been an intended consequence of the budget’s measures. The OBR’s fat-finger moment an hour before the Chancellor’s speech attracted a lot of unwanted attention, but it is some of the very odd assumptions embedded in their forward projections that I am most interested in. I have already mentioned their business investment forecast, which I cannot rationalise, and I have written extensively about the crazy idea that flaky guesses at future productivity, which appear to completely ignore the impact of AI’s ubiquitous influence across the economy, should drive its growth forecasts. But the OBR is also forecasting that the interest rate on the stock of mortgage loans increases over the period to 5% by 2029. In my view, this is just wrong (it’s currently significantly below 4%). The OBR is also saying that over this five-year period, the average yield on ten-year gilts will be 5.1%. This is an equally bonkers forecast. Ten-year yields are currently just above 4.4% and will track very closely what happens to base rate, as they always have done. (see below) ![Roundup of the week: 28 November 2025](https://cdn.sanity.io/images/v3acfbvo/production/328cd5b9b70a90c699327fd471e6ea45599b305f-2268x1374.png?w=1600&fit=max&auto=format) Falling inflation over the period and lower base rates are just not compatible with this nonsense. Summary In summary, once again I think the OBR has got it wrong, and in this I appear to agree with the Chancellor, who said the economy would beat the gloomy forecasts in her speech. This, I think, provides a window into what I believe is the most important characteristic of this budget. Like me, the Chancellor thinks the OBR is wrong and is way too pessimistic. However, because she can’t just ignore its arcane and doom-laden nonsense, she has actually done something quite clever and broadly in line with what I advocated in a number of pre-budget blogs. Because she believes the economy will outperform the OBR’s assumptions (again), she has back-loaded the tax increases, the bulk of which don’t take effect until 2027 and 2028. If I am right about better growth, slight outperformance of the OBR’s assumptions delivers a current budget surplus earlier than modelled. In fact, with only a 0.25% increase in average GDP growth over the period (where the OBR was back in March), the current budget surplus in 29/30 is £47bn, more than enough to countenance tax cuts or the cancellation of her allowance freezes and her mansion tax. My guess is that these tax increases will not see the light of day. Not only are the OBR’s forecasts wrong, but so is the whole budget process, and in this, I appear not to be alone. Maybe someone might have the courage to reform something that is clearly not working and that, according to the ex-Chief Economist at the Bank of England and MPC member, Andy Haldane, “sucked all life” out of the economy ahead of the budget. The first step in that process has already been taken; now that we will only be subjected to this charade once a year, but a lot more needs to change if we are to avoid this self-inflicted nonsense in the future. Finally, in conclusion, I suppose I should highlight where I do agree with the OBR, which has said in the volumes of arcane analysis and forecasting that none of the budget’s measures will have a material effect on the economy’s longer-term potential, but then if you’ve made it this far you will, if you agree with me, already know that. ## Markets Markets everywhere have, in general, had a much better week. Equities and bonds have rallied from last week’s sell-off. Interestingly, UK gilts had a particularly good day yesterday in the wake of the budget speech, which many media commentators would have been surprised by. Given this week’s length already, I didn’t think a wordy description of what’s happened would be that welcome. I will very briefly comment, though, on three bits of corporate news. ### Meta’s apparent commitment to rent and then buy Google’s TPU chips This is a significant development in the ongoing and fascinating evolution of the AI industrial revolution. Quietly, Google has been developing its homegrown chip technology, in part to avoid an overt dependence on Nvidia or AMD, and also to build a chip business that might be able to compete with these companies. A TPU is a specialised, custom-built processor for AI and machine learning workloads developed by Google. TPUs are well-suited to high-volume matrix multiplication, a common operation in deep learning. They are also more energy-efficient than GPUs (Nvidia chips), but not as flexible. GPUs are more powerful for general-purpose and diverse AI workloads. This news was taken well in the case of both Google and Meta, and although early in the process, it highlights the fact that Nvidia’s near monopoly in the AI chip industry was always likely to be challenged sooner or later. ### EasyJet EasyJet announced very good full-year figures earlier this week. The standout performance was the relatively new holiday business, which achieved a financial target well ahead of schedule and now has an upgraded target of £450mn of pretax profit by 2030. Elsewhere, the core business also performed very well, resulting in 18% EBIT growth and a 20% dividend increase. For me, another standout figure was the 18% ROCE. The fact that for the year to September 2027, the share price sits at a 16% discount to easyJet’s NAV underlines how undervalued the equity is. It’s also worth noting that the business has a significant net cash balance sheet (over £600mn of net cash on the B/S to September 2025). ### Kingfisher Kingfisher delivered surprisingly good results earlier this week, with an especially strong performance from the UK businesses in stark contrast to a still relatively feeble French performance. This is particularly encouraging (as was EasyJet’s performance), given my more upbeat view of the UK economy's performance going forward. In fact, so good were the numbers that Kingfisher felt able to raise guidance for the next financial year to Sept. 26, with the midpoint of that guidance up by 9%. ## What to look out for next week The macro data week is relatively quiet until Friday, when the US releases important inflation data, which will be very closely scrutinised because of its bearing on the upcoming US interest rate decision. Relatively dovish comments this week from several important FOMC members have added to the growing sense that a cut will be delivered at the next meeting. It is also a pretty quiet results week, with so far only one company that I can see in the strategies reporting (Paragon).