According to official data from the Office for National Statistics (ONS), the British economy unexpectedly contracted by 0.1 percent in October, marking the second consecutive monthly decline.
Economists predicted a return to moderate growth after September’s contraction, but uncertainty over the October budget and persistently high rates of interest kept each consumers and businesses from spending freely.
The ONS recorded a particularly weak month for pubs, restaurants and retailers, while some skilled services sectors reminiscent of property, law and accounting firms accelerated work ahead of the Chancellor’s Budget announcement.
Chancellor Rachel Reeves described the figures as “disappointing” but maintained that policies were in place to make sure long-term growth. Shadow Chancellor Mel Stride argued that the newest figures reveal the negative impact of the Government’s decisions and pessimistic economic messages.
Economists also emphasized that the brake on economic growth cannot result solely from the consequences of the budget. Paul Dales, chief UK economist at Capital Economics, said higher rates of interest could have a larger impact on economic activity than expected. Although the Bank of England has cut rates twice this yr, they continue to be at elevated levels in comparison with previous years, further discouraging spending and investment.
The economy has grown only once in the last five months and is now 0.1 per cent lower than before Labor took office in July. Despite the weak data for October, some experts, including Simon Wells from HSBC, warned against reading an excessive amount of into data for one month, as initial estimates are sometimes subject to revision.
The economy still expanded modestly at 0.1 percent in the three months to October, providing a glimmer of hope whilst the short-term outlook stays uncertain.
