The UK economy unexpectedly contracted in the run-up to the Budget, according to the latest official figures from the Office for National Statistics (ONS).
Gross domestic product (GDP) fell by 0.1% in October, defying economists’ forecasts of 0.1% growth. Output also declined by 0.1% across the three months to October, underlining a broader loss of momentum in the economy.
Manufacturing was a key drag. Production output dropped by 0.5% over the three months, mainly due to a sharp 17.7% fall in vehicle manufacturing. This followed a cyber-attack on Jaguar Land Rover that halted production at its UK plants throughout September. Although factory activity resumed in early October, the recovery was limited. Vehicle manufacturing remained below August levels, despite contributing to a 1.1% increase in overall production output during the month.
Economic uncertainty ahead of the Budget also weighed on activity. Analysts said concerns about future policy decisions had slowed both consumer spending and business investment. The services sector, which encompasses retail and professional services, experienced no growth over the three months to October.
The weaker-than-expected data has increased expectations that the Bank of England will cut interest rates at its next meeting. Ruth Gregory, Deputy Chief UK Economist at Capital Economics, noted that the economy has grown in only one of the past seven months, reinforcing the case for monetary easing.
The Government has reiterated its commitment to economic growth, highlighting plans to reduce energy bills and invest in significant infrastructure projects. However, critics argue that the Budget itself has contributed to the slowdown.
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