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FTSE 100 Falls 2% on Weak GDP, Banking and Energy Slumps

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  Published in Stocks and Investing on Thursday, November 13th 2025 at 10:12 GMT by reuters.com

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UK Markets Slide as Weak GDP, Stiff Energy, and Troubled Financials Bite

On November 13 2025, the FTSE 100 tumbled sharply, falling almost 2 percent against a backdrop of disappointing quarterly GDP figures and a broader sell‑off in the financial and energy sectors. The slump was the largest one‑day drop in the index since early 2024, and it underscored a growing sense of uncertainty about the trajectory of the British economy as it grapples with rising inflation, higher borrowing costs, and a slowdown in industrial output.

GDP data – a double‑blow to sentiment

The Office for National Statistics (ONS) released its revised figures for the third quarter of 2025, revealing real GDP growth of just 0.4 percent, a sharp decline from the 0.8 percent forecast that the market had been pricing in. The data showed a muted rebound in the services sector, which has traditionally been the engine of UK growth, as well as a further contraction in manufacturing output. Retail sales remained sluggish, while the services component of the GDP basket slipped by 0.3 percent, indicating that consumer spending was still being dampened by high energy bills and an uncertain job market.

The weaker-than‑expected growth data had a two‑fold effect. First, it dampened expectations of a robust recovery that could justify higher borrowing costs. Second, it highlighted a structural problem in the economy: inflation remains elevated, and the Bank of England’s policy rate has been kept at 5.25 percent for three consecutive policy meetings. Market participants now fear that the central bank may have to keep rates high for longer than previously expected, which could stifle investment and consumer spending.

Financial stocks drag the index

The financial sector, which accounts for roughly a third of the FTSE 100’s market weight, was the largest contributor to the decline. Major banks such as HSBC, Lloyds, Barclays, and Royal Bank of Scotland all reported earnings that fell short of analyst expectations. The decline in earnings was driven by a combination of weaker loan growth, higher provisioning for credit losses, and a modest lift in interest income as borrowing costs rose.

HSBC’s chief financial officer noted that the bank’s loan portfolio has been hit by the weaker macro backdrop, with both consumer and corporate lending showing slower expansion. Lloyds, meanwhile, cut its earnings forecast for the full year by about 7 percent, citing tighter profit margins and the cost of higher interest rates. The weaker lending environment is compounded by the fact that the UK’s banking sector is still feeling the after‑shocks of the 2021‑22 period when the Bank of England had to step in with emergency liquidity support.

Because of the heavy weighting of banks in the index, the fall in the financial sector’s shares translated into a sharp drag on the FTSE 100 as a whole. The negative impact was compounded by the fact that many of the UK banks have been involved in cross‑border lending to European and Asian borrowers, which has grown more expensive in the current high‑interest environment.

Energy shares take a hit amid a softer commodity market

Energy stocks were the second-largest sector to contribute to the fall. Several of the UK’s largest oil and gas producers, including BP, Shell, and Centrica, saw their shares slip between 3 percent and 5 percent. The downward pressure on these stocks stemmed from two main factors:

1. Global commodity prices – International oil prices fell by around 4 percent in the days leading up to the data release, driven by a surge in supply from the United States and a muted demand outlook from the European Union. As a result, the earnings prospects for oil‑heavy companies such as BP and Shell were revised downward.

2. Lower profit margins – Energy companies are also facing a squeeze in margins as they try to keep up with the energy transition. BP’s head of earnings forecast the company’s net profit margin to be 9 percent for the year, a modest decline from the 10 percent margin seen last year.

The dip in energy shares was also a reflection of broader worries that the UK might need to import more energy from abroad if domestic production does not keep pace with demand. While the government has announced plans to increase renewable energy output, the transition is still in its early stages, and the energy market remains highly volatile.

Market expectations and outlook

In the wake of the data, traders and analysts have started to reassess the prospects for a mid‑term recovery. Some, such as the research team at JPMorgan, believe that the current macro environment may force the Bank of England to hold rates at 5.25 percent for at least another 12 months, which could keep borrowing costs high and constrain corporate expansion. Others argue that the market is over‑reacting, pointing out that the UK economy has historically bounced back from similar downturns in the past.

Investors are now turning to defensive sectors such as utilities and consumer staples, which are seen as more resilient to higher interest rates and inflationary pressures. In particular, the FTSE 100’s consumer staples group saw a modest gain of 1.2 percent, as companies like Reckitt Benckiser and Diageo have solid earnings and strong brand loyalty that can weather macro‑economic headwinds.

Bottom line

The FTSE 100’s retreat on November 13 was driven by a confluence of weaker GDP data, a slump in the banking sector, and falling energy prices. The index’s decline serves as a stark reminder that the UK economy remains in a fragile state as it balances higher interest rates, inflation, and the need for structural reforms. While the markets are already pricing in a slower recovery, the upcoming ONS releases and the Bank of England’s policy decisions will be key determinants of whether the index will rebound or continue to slide in the near term.