The UK economy shrank for the second consecutive month in October, with a 0.1% drop, despite expectations of a return to growth following a decline in September. Official figures from the Office for National Statistics (ONS) revealed that various sectors, including pubs, restaurants, and retail, reported “weak months,” contributing to the overall slowdown in economic activity.
Chancellor Rachel Reeves described the figure as “disappointing” but assured that policies had been implemented to foster long-term economic growth. Shadow Chancellor Mel Stride criticized the decline, attributing it to the government’s decisions and its continual negative outlook on the economy.
KPMG’s chief economist Yael Selfin noted that uncertainty ahead of the October 30 Budget held back business and consumer spending. However, some sectors, such as real estate, law firms, and accountancy, reportedly brought forward work before the Budget was announced.
In a separate survey, consumer confidence in December showed a slight improvement in personal financial outlooks for the year ahead, though general views on the economy remained unchanged from November, with many unsure of the UK’s future economic direction.
The UK economy has grown only once in the past five months, with ONS data indicating a 0.1% contraction in October, following a similar decline in September. Capital Economics suggested that higher interest rates might be a lasting factor holding back the economy, with the Bank of England’s interest rate at 4.75%.
While economists cautioned against overemphasizing October’s figures, they also noted that the economy grew by 0.1% in the three months to October.
Manufacturing saw the steepest drop in activity, down 0.6%, followed by construction, which fell by 0.4%. The services sector, which dominates the UK economy, showed zero growth. Small business owners, like Rick Gaglio of Twisted Fabric, a menswear shop in Hertfordshire, expressed concerns over continued consumer caution due to high prices and inflation.
Opposition leader Sir Keir Starmer, who has pledged to secure the highest sustained economic growth in the G7, has also set new economic milestones, including a goal of increasing real household disposable income per person. Additionally, Starmer reaffirmed his commitment to building 1.5 million homes in England by 2029 to support economic growth.