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Britain’s economy unexpectedly shrank in October, official figures revealed on Friday, dealing a setback to the Labour government’s efforts to stimulate growth.
The Office for National Statistics reported that gross domestic product fell by 0.1 per cent in October, following a similar contraction in September, while economists had predicted modest growth of 0.1 per cent.
Manufacturing activity improved during the month, aided by Jaguar Land Rover resuming production after a cyberattack had disrupted operations in September.
Despite this, analysts highlighted that both businesses and consumers had curbed spending ahead of the widely anticipated annual budget.
Lindsay James, investment manager at Quilter, noted that “business and consumers were braced for tax hikes, and the endless speculation and leaks have once again put the brake on the UK economy.”
Prime Minister Keir Starmer’s administration introduced higher taxes in last month’s budget to reduce national debt and fund public services.
Alongside the budget, official forecasts downgraded UK economic growth for the period from next year through to 2029.
Finance Minister Rachel Reeves had previously increased taxes on businesses in her first budget last year, a move blamed for dampening growth and contributing to rising unemployment.
Her latest measures, unveiled in November, focused on workers.
Economists suggested that the weaker-than-expected economic performance would heighten expectations that the Bank of England could cut interest rates at its next policy meeting.
