The UK economy contracted in October, marking the second month of decline. It fell 0.1% despite growth predictions.
The Office for National Statistics (ONS) reported weak activity across pubs, restaurants, and retail businesses.
Industry Reactions and Key Insights
Chancellor Rachel Reeves called the results “disappointing” but said long-term growth policies were in place.
Shadow Chancellor Mel Stride blamed the decline on recent government decisions and their impact on economic confidence.
KPMG’s economist Yael Selfin linked the slowdown to uncertainty before the October 30 Budget, delaying business and consumer spending.
Real estate, law firms, and accountancy firms completed work earlier, anticipating the Budget, according to the ONS.
A GfK survey showed improved consumer confidence in personal finances for 2024, but views on the economy remained unchanged.
GfK’s Neil Bellamy said negative sentiment about the UK’s economic outlook continued to suppress consumer confidence.
Sector Impacts and Economic Outlook
Manufacturing saw the largest decline, dropping 0.6%, followed by construction, which fell 0.4%.
The services sector, a major part of the UK economy, saw no growth in October.
Twisted Fabric menswear owner Rick Gaglio noted ongoing caution among consumers, driven by inflation and higher prices.
Retail sales also slowed during the summer due to unusually wet weather, according to Gaglio.
ONS data revealed the economy grew by 0.1% over the three months ending in October.
Capital Economics reported GDP was 0.1% below pre-Labour election levels in July, indicating further economic strain.
Chief UK economist Paul Dales noted that higher interest rates, not just the Budget, were slowing the economy.
Interest rates, though cut twice this year, remain at 4.75%, still high compared to recent years.
The Bank of England will make its final 2024 rate decision next week, but no big changes are expected.
Economists advised against over-interpreting October’s initial figures, as ONS data may be revised.
Labour leader Sir Keir Starmer had earlier warned of a “painful” Budget but later denied undermining confidence.
He aims for the UK to lead G7 countries in sustained economic growth.
The government pledged to monitor progress through household income data and build 1.5 million homes in England.