The United Kingdom’s economy unexpectedly shrank in October, official figures released on Friday show, presenting a fresh challenge to the Labour government’s efforts to stimulate economic expansion.
According to the Office for National Statistics (ONS), gross domestic product (GDP) fell by 0.1 per cent in October, following a 0.1 per cent contraction in September. Economists had widely predicted modest growth of 0.1 per cent for the month, underscoring the disappointment of the latest data.
Despite a rebound in manufacturing — aided by the resumption of operations at carmaker Jaguar Land Rover after a cyberattack in September — broader economic activity weakened. Analysts noted that both households and businesses pulled back on spending in the run-up to the government’s annual budget, released in late November.
“Business and consumers were braced for tax hikes and the endless speculation and leaks have once again put a brake on the UK economy,” said Lindsay James, investment manager at Quilter.
Prime Minister Keir Starmer’s Labour administration has introduced a series of tax increases aimed at reducing the national debt and funding public services, but critics argue the measures have dampened economic momentum. Data released alongside the budget also revised down expectations for UK growth through to 2029.
Finance minister Rachel Reeves, who has raised business taxes since her first budget, introduced further increases targeting workers in November, a move some economists say has weighed on confidence and output.
The surprise contraction has intensified expectations that the Bank of England may cut interest rates when it meets next week, as slowing growth and subdued spending fuel speculation of easing monetary policy.
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