The UK economy shrank in October, marking two consecutive months of contraction. Official data revealed a 0.1% drop, following September’s decline.
The Office for National Statistics (ONS) reported stalled or declining activity in pubs, restaurants, and retail businesses.
Industry Reactions and Market Sentiment
Chancellor Rachel Reeves called the figures “disappointing” but said policies aim to achieve long-term economic growth. Shadow Chancellor Mel Stride blamed recent government decisions for harming growth and confidence.
KPMG’s chief economist, Yael Selfin, linked the slowdown to uncertainty before the October 30 Budget. Businesses and consumers delayed spending, while real estate, law firms, and accountancy accelerated work before the announcement.
A GfK survey found consumers were slightly more confident about personal finances in 2024, but views on the economy stayed unchanged. GfK’s Neil Bellamy said ongoing negative sentiment about the economy is suppressing consumer confidence.
Sector-Specific Performance and Outlook
Manufacturing saw the largest contraction, down 0.6%, while construction dropped 0.4%. The services sector recorded zero growth.
Rick Gaglio, owner of Twisted Fabric menswear shop, said customers remain cautious due to inflation and rising prices. He noted slow summer sales due to wet weather and described 2024 as a challenging year for small businesses.
ONS data showed the economy grew by 0.1% over the three months leading to October. Capital Economics reported GDP was 0.1% lower than pre-election levels in July. Chief UK economist Paul Dales said interest rates, not just the Budget, were restraining growth.
Interest rates, though cut twice in 2024, remain at 4.75%, higher than in recent years. The Bank of England’s final 2024 rate decision is expected next week, but changes are unlikely before next year.
Economists warned against over-reliance on October’s data, as it’s an early estimate and may be revised. Labour leader Sir Keir Starmer predicted a “painful” Budget and later denied undermining economic confidence. He pledged to achieve the highest sustained growth among G7 nations and set plans to track real household disposable income per person. The government also aims to build 1.5 million homes in England.
