The Office for National Statistics said gross domestic product contracted 0.1% in October, marking the first time the economy has contracted for two consecutive months since the onset of the Covid-19 pandemic
The UK economy has unexpectedly shrunk in October, marking two consecutive months of negative growth for the first time since the pandemic began, according to new data.
Chancellor Rachel Reeves expressed her disappointment at the figures, citing a weak month for pubs and restaurants which impacted growth amidst uncertainty leading up to the autumn Budget. The Office for National Statistics (ONS) reported that the gross domestic product (GDP) contracted by 0.1% in October, contrary to economists’ expectations of a 0.1% rise.
This follows an estimated 0.1% fall in September, making it the first instance of back-to-back contraction since March and April 2020, during the initial stages of the Covid-19 pandemic. This slight shift in economic outlook comes after a marginal 0.1% growth over the last quarter, between July and September.
The ONS also noted that the services sector recorded no growth in October, mirroring its performance in September. Liz McKeown, the ONS’s director of economic statistics, commented: “The economy contracted slightly in October, with services showing no growth overall and production and construction both falling.”
She added: “Oil and gas extraction, pubs and restaurants and retail all had weak months, partially offset by growth in telecoms, logistics, and legal firms. However, the economy still grew a little over the last three months as a whole.”
The Chancellor has made her stance clear, stating: “We are determined to deliver economic growth as higher growth means increased living standards for everyone, everywhere. This is what our Plan for Change is all about. While the figures this month are disappointing, we have put in place policies to deliver long-term economic growth.”
Ahead of the autumn Budget announcement at the end of the month, the ONS’s monthly business survey revealed a varied reaction. Certain sectors such as manufacturing, retail and recruitment reported that their turnover was impacted as they awaited the tax-setting statement.
Conversely, industries like real estate and legal services experienced a boost in activity leading up to the announcement, the ONS noted.