UK Economy Contracts in October, Fueling Growth Fears

Britain’s economy shrank again in October, surprising analysts and creating fresh challenges for the Labour government as it tries to revive growth. New data released on Friday by the Office for National Statistics showed that the country’s GDP slipped by 0.1 per cent in October, matching the 0.1 per cent contraction recorded in September. Economists had predicted a modest rebound of 0.1 per cent, making the decline even more concerning for policymakers.

Although manufacturing made a partial comeback—helped by Jaguar Land Rover restoring production after a September cyberattack—analysts noted that overall economic activity remained subdued. Both consumers and businesses tightened spending as they awaited Britain’s heavily anticipated annual budget, a period filled with speculation about tax increases and new fiscal adjustments.

“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.

Last month’s budget confirmed those fears. Prime Minister Keir Starmer’s Labour government introduced tax increases aimed at reducing state debt and strengthening public services. At the same time, the UK’s long-term growth outlook was downgraded, with projections lowered from next year through 2029.

Finance minister Rachel Reeves, who had already raised business taxes in her inaugural budget last year—a move widely linked to slower growth and rising unemployment—returned in November with new measures that placed additional financial pressure on workers.

With back-to-back GDP contractions and weakening confidence across key sectors, analysts say the latest figures bolster expectations that the Bank of England may finally cut interest rates at its meeting next week.

AFP