The UK economy shrank in October, marking the second consecutive month of contraction. Despite expectations for growth, official data revealed a 0.1% drop following a similar decline in September.
The Office for National Statistics (ONS) reported stalled or declining activity across multiple sectors. Pubs, restaurants, and retail businesses experienced notably weak performance during the period.
Industry Reactions and Commentary
Chancellor Rachel Reeves called the figures “disappointing” but stated that policies were in place for long-term growth. Shadow Chancellor Mel Stride criticized the government’s approach, arguing that recent decisions had negatively affected growth and confidence.
KPMG’s chief economist, Yael Selfin, linked the slowdown to uncertainty before the October 30 Budget. Businesses and consumers delayed spending, though some industries, like real estate, law firms, and accountancy, accelerated work ahead of the announcement.
A survey by market research firm GfK showed a slight rise in consumer confidence for personal finances in 2024. However, broader views on the economy remained unchanged, with GfK’s Neil Bellamy attributing this to ongoing negative sentiment about the UK’s economic situation.
Sector-Specific Impacts and Economic Outlook
The manufacturing sector saw the largest contraction, down 0.6%, while construction activity declined by 0.4%. The services sector, which constitutes a significant portion of the UK economy, recorded zero growth.
Rick Gaglio, owner of Twisted Fabric menswear shop, noted that consumer caution remained high. He cited inflation and persistent price increases as major concerns. Retail sales were also hampered by wet summer weather, further straining small businesses.
Data from ONS showed the economy expanded by 0.1% in the three months leading to October. However, this minimal growth highlights the ongoing economic struggles.
Capital Economics reported that GDP was 0.1% below levels seen before Labour’s July election victory. Chief UK economist Paul Dales argued that factors beyond the Budget, such as the lingering impact of higher interest rates, were restraining growth.
Interest rates, though cut twice in 2024, remain at 4.75%, a relatively high level compared to recent years. The Bank of England’s final rate decision for 2024 is expected next week, but significant changes are unlikely before next year.
Economists warned against placing too much weight on the October data, as it is an early estimate that may be revised. Nonetheless, the broader economic outlook remains uncertain.
Labour leader Sir Keir Starmer had earlier predicted a “painful” Budget and later denied undermining economic confidence. He has since pledged to achieve the highest sustained growth among G7 countries. To measure progress, the government plans to track real household disposable income per person and build 1.5 million homes in England.