The UK’s economy unexpectedly got smaller by 0.1% in October
The GDP numbers highlight the big challenge for Labour in getting the economy to grow.
Britain’s economy shrank by 0.1% in October, showing how difficult it will be for Labour to boost growth.
Data from the Office for National Statistics revealed that the drop in GDP was caused by declines in construction and production, while the services sector stayed the same.
Economists had expected the economy to grow by 0.1%. This follows a 0.1% decline in September and slow growth of 0.1% in the third quarter of the year, according to last month’s figures.
Keir Starmer said last week that the government’s goal is to make the UK the fastest-growing economy in the G7, while promising to increase household income by 2029.
Many companies have said they will cut back on spending and hiring after Labour’s budget in October, which included £40 billion in tax increases.
Economists said that the economy shrank for the second month in a row, meaning it only grew in one of the five months up to October. This could mean the economy shrank in the fourth quarter as a whole.
Chancellor Rachel Reeves called the numbers “disappointing” but said Labour is working to get the economy back on track for growth.
“Although this month’s numbers are disappointing, we have put policies in place to achieve long-term economic growth,” Reeves said. “We are determined to create economic growth because it will improve living standards for everyone, everywhere.”
Business groups have said that the changes in the budget, such as higher national insurance contributions for employers, will increase their costs and discourage them from investing.
In October, production dropped by 0.6% due to decreases in manufacturing, mining, and quarrying. Construction also fell by 0.4%.
Liz McKeown, the director of economic statistics at the ONS, said, “The economy shrank a little in October. Services showed no growth, and both production and construction decreased.”
“Oil and gas extraction, pubs and restaurants, and retail all had weak performances, but there was some growth in telecoms, logistics, and legal firms.”
Paul Dales, the main UK economist at Capital Economics, said it’s hard to know how much of the drop in activity is temporary because things were paused before the budget.
“The real concern is that even more activity might have been delayed or canceled after the budget,” he said, pointing to weak PMI data. “It’s possible the economy actually shrank in the fourth quarter.”
Recent figures showed that growth in the UK’s main services sector slowed to its lowest level in over a year in November, as businesses adjusted to higher taxes in the budget.
The S&P Global UK services PMI survey, an important indicator, scored 50.8 in November, down from 52.0 in October.
Published: 13th December 2024
Also Read:
“UK delays Shein’s stock listing over supply chain concerns
Tamal Ray’s easy recipe for making butter for croissants
How Can Obstacles Push Us Forward in Life?
