Britain’s economy unexpectedly shrank for the second consecutive month in October, dealing a setback to the Labour government’s efforts to stimulate growth.
Figures released on Friday by the Office for National Statistics showed that the country’s gross domestic product fell by 0.1 per cent in October, following a similar 0.1 per cent contraction in September. Economists had projected a modest growth of 0.1 per cent.
The data revealed that manufacturing activity picked up in October as Jaguar Land Rover resumed full operations after a cyberattack that slowed output in September. However, analysts said this rebound was offset by weakened spending from businesses and consumers ahead of the government’s annual budget.
“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.
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Prime Minister Keir Starmer’s Labour administration introduced a series of tax increases in last month’s budget aimed at reducing public debt and strengthening essential services. Economic growth forecasts were also revised downward from 2025 through 2029 in projections released alongside the budget.
Finance Minister Rachel Reeves, whose earlier tax increases on businesses have been linked to sluggish growth and rising unemployment, returned in November with additional levies—this time targeting workers.
Analysts noted that the latest GDP figures reinforce expectations that the Bank of England could announce an interest rate cut when it meets next week.