The UK economy recorded an unexpected contraction in October, according to official data, as business and consumer activity slowed in anticipation of the government’s upcoming budget.
Preliminary figures indicate the nation’s Gross Domestic Product (GDP) declined by 0.1% during the month, following a similar drop in September. This result fell short of market expectations for modest growth and marks a fourth consecutive month without economic expansion.
Analysts point to widespread hesitation among companies and households ahead of the chancellor’s fiscal announcement as a primary factor. The dominant services sector saw output fall by 0.3%, while construction activity dropped by 0.6%. A notable slump in retail spending and car sales contributed significantly to the downturn.
The data also reveals a manufacturing sector struggling to regain its footing following a major cyber-attack on a leading automaker earlier in the autumn. While production showed a 1.1% increase in October, the rebound was weaker than analysts had projected, with the automotive industry still operating well below its pre-attack capacity.
This persistent economic softness is strengthening the case for the Bank of England to lower interest rates at its next policy meeting. With inflationary pressures easing and concerns over growth mounting, a rate cut is widely anticipated by financial markets.
Economic observers warn that the pre-budget uncertainty has had a chilling effect. Many firms reported delaying investment and hiring decisions until the government’s tax and spending plans were clear. This caution is expected to result in subdued economic performance through the end of the year.
Over the three-month period leading to October, GDP also contracted by 0.1%, increasing the risk of an overall decline in output for the final quarter of the year. The latest snapshot underscores the significant challenges facing policymakers as they seek to stimulate sustainable economic growth.