The UK economy unexpectedly shrank by 0.1 per cent in October, marking its second consecutive monthly decline, according to official data from the Office for National Statistics (ONS).
Economists had predicted a return to modest growth following September’s fall, but uncertainty ahead of the October Budget and persistently high interest rates kept both consumers and businesses from spending freely.
The ONS noted a particularly weak month for pubs, restaurants, and retailers, while some professional services sectors such as real estate, legal, and accountancy firms brought forward work ahead of the Chancellor’s Budget announcement.
Chancellor Rachel Reeves described the figures as “disappointing” but maintained that policies are in place to deliver long-term growth. Shadow Chancellor Mel Stride argued the latest numbers reveal the negative impact of the government’s decisions and pessimistic economic messaging.
Economists also highlighted that the drag on growth may not be solely due to the Budget’s effects. Paul Dales, chief UK economist at Capital Economics, said higher interest rates may be weighing on activity more than anticipated. Although the Bank of England has cut rates twice this year, they remain elevated compared to previous years, further discouraging spending and investment.
Over the past five months, the economy has grown only once, and it now sits 0.1 per cent lower than before Labour took office in July. Despite the weak October figure, some experts, including Simon Wells from HSBC, cautioned against reading too much into a single month’s data, as initial estimates are often subject to revision.
In the three months to October, the economy still managed a slight expansion of 0.1 per cent, offering a glimmer of hope even as near-term prospects remain uncertain.