The 海角视频 economy contracted by 0.1% in October, marking the second month of consecutive decline, as businesses held back on investments due to ongoing speculation about potential tax increases in Chancellor Rachel Reeves' second Autumn Budget. The Office for National Statistics (ONS) released figures that dealt a further blow to the Chancellor's growth strategy, revealing a 0.5% contraction in production output and a 0.3% decrease in construction.
The crucial services sector, which is believed to constitute over 80% of the economy, saw no growth. Economists had previously predicted a modest growth of 0.1% for the month, as reported by .
Liz McKeown, director of economic statistics at the ONS, said: "The economy contracted slightly in the latest three months as production fell again and services growth stalled."
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She added, "Within production there was continued weakness in car manufacturing, with the industry only making a slight recovery in October from the substantial fall in output seen in the previous month."
The economy also shrank by 0.1% in September following a cyber attack on Jaguar Land Rover that led to a downturn in the manufacturing sector.
A Treasury spokesperson said: “We are determined to defy the forecasts on growth and create good jobs, so everyone is better off, while also helping us invest in better public services.”
Shadow Chancellor Mel Stride said: "This morning's news that the economy unexpectedly shrank in the three months to October is extremely concerning but it's as a direct result of Labour's economic mismanagement."
"Rachel Reeves promised growth but Labour has no plan for the economy – just their own survival, that's why Reeves presented a Benefits Budget that rewards welfare not work. For months, Rachel Reeves has misled the British public."
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Lindsay James, investment strategist at Quilter, noted the decline underscores "the continuing trend of the past three months that have seen the already fragile levels of growth evaporate and completely go into reverse".
He continued: "Much of this can be put down to the Budget and the deterioration in consumer confidence, spending and business planning.
"Business and consumers were braced for tax hikes and the endless speculation and leaks have once again put a brake on the 海角视频 economy, just as it did last year."
Both businesses and consumers reduced expenditure in the lead-up to the Budget amidst widespread conjecture about prospective tax increases.
Among the most damaging pieces of speculation concerned potential income tax rises. Following weeks of rumour-mongering, unauthorised Treasury briefings to the Financial Times disclosed that Chancellor Rachel Reeves and Prime Minister Sir Keir Starmer had initially planned, then abandoned, proposals for an income tax increase.
Business activity suffered as a consequence, with a Purchasing Managers Index (PMI) from S&P previously indicating a postponement in decision-making for services firms ahead of Reeves' Budget. The government's reversal on income tax triggered alarm across financial markets, with the yield on 10-year 海角视频 gilts surging by 13 basis points at the opening of trading to reach 4.57 per cent.
This represented the sharpest rise since July, when anxiety swept through bond markets following Rachel Reeves appearing emotional in the House of Commons.
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Whilst firms received some fiscal certainty after Reeves presented her second Budget on November 26, the 海角视频 also suffered a significant setback from the fiscal watchdog, which reduced growth projections for every year from 2026 through to 2030.
This followed the Office for Budget Responsibility (OBR) concluding that the measures outlined in the Budget would contribute little towards stimulating growth.
The watchdog additionally stated that the Chancellor's decision to increase taxes by £26bn – affecting landlords, the wealthy, bookmakers and pensioners – could spark unintended ramifications for the economy.
The OBR noted that levies such as capital gains taxes would prove more complex to assess the impact of, as they were "highly sensitive" to behaviour and fluctuating asset prices.
It further cautioned that it might find it challenging to gauge how raising taxes comprehensively could affect the 海角视频 economy, whilst the projection for overall tax revenue carried "significant uncertainty".