London, 5 November 2026 — EBM Newsdesk Analysis — By Anthony Gill
On 5 November 2026, the pound stood at its highest level since the Brexit referendum on a trade-weighted basis, just as the Bank of England was expected to raise interest rates by a quarter point. Markets are still enjoying the relief that followed the US midterm elections, with fears of a wider Middle East war fading and oil sharply lower. Yet the same morning brought a warning from Next, whose UK sales growth has slowed. The question is whether Britain’s new-found strength can survive the bill for the last eight months.
For European businesses, the shift matters. Britain is starting to look like the steadier option, while France struggles with political and economic trouble and eurozone inflation has reached 4%. A stronger pound makes European goods cheaper for British buyers, and better relations with Brussels could mean fewer trade frictions over time. But a rally built on higher interest rates is not the same as a rally built on a healthy economy.
Relief, With an AI Hangover
The midterm result has eased one set of nerves. Investors now hope Donald Trump will hold back from fresh strikes on Iran and that talks will produce something, which has pushed oil well below the highs seen after the Hormuz tanker strikes.
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SubscribeTechnology is another matter. Worries about a slowdown in data centre building, the same anxiety behind Google’s AI bill, are still weighing on the sector. Japan showed the split neatly. The Nikkei fell as chipmakers and electronics stocks lost ground, while the broader Topix rose because cheaper energy helps an export-heavy economy.
Wall Street looks set for the same pattern, with the S&P 500 expected to hold most of yesterday’s rally and Nasdaq futures pointing lower. The FTSE 100 is the quiet winner. It has little technology exposure, which suddenly looks like a virtue rather than an embarrassment.
Why the Bank Still Has to Act
Sterling’s rise has several causes. Growth has been a little stronger than expected, manufacturing surprised on the upside, and relations with Europe are improving. International investors are beginning to see Britain as stable again, which would have been a brave call not long ago.
None of that removes the inflation problem. Energy prices remain about a third higher than before the conflict began, and companies are expected to pass their higher costs on to customers. Cheaper oil this week does not undo eight months of damage.
That is why a rise of 0.25 percentage points is widely expected today, following the Fed’s rate rise across the Atlantic. The aim is simple: make borrowing dearer, cool spending and hiring, and stop wage growth from feeding prices. A pause is still possible given how fast events in Iran can move, but it would only delay the decision.
Markets are pricing in four rises by the end of next year. With growth expected to slow, that looks too many. Much depends on the Middle East.
For households, the picture is split. Borrowers who need to remortgage must choose between the certainty of a fixed rate and a sharp jump in monthly payments. Savers are better placed, with some easy-access accounts already paying about 5%, although the market has already priced in much of what is coming.
Next Shows Where the Growth Is
Next offers a useful picture of the British consumer. Full-price UK sales rose just 2% in the quarter, down from 3.6% in the first half, as warm weather kept shoppers away from autumn and winter ranges. Bills are also rising, and people are thinking harder about what they buy.
Overseas, the story is very different. Online sales abroad jumped 32.2%, comfortably beating the 20.5% expected, and lifted total full-price product sales by 8.1%. Next has stopped being just a British high street chain. It is now a platform selling its own brands, licensed labels and third-party names to customers well beyond the UK.
Europe is not cost-free, though. New EU tariffs on goods sent from UK stock are expected to add about £5m to costs this year. Next plans to reduce that by changing its distribution and raising some European prices modestly. Its full-year profit forecast stays at £1.255bn, up 8.4%.
Where I Land
The pound’s rally deserves some credit, but it should not be mistaken for a clean bill of health. Britain looks better mainly because its neighbours look worse and because its central bank is about to make money more expensive. Next tells the more honest story. The British shopper is cautious, and the growth is abroad. That is good news for Next, and rather less good news for Britain.
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