UK Economy Shrinks Unexpectedly in October

UK economy contracts 0.1% in October as Budget uncertainty and production issues slow growth.

UK Economy Contracts 0.1% in October

The UK economy unexpectedly shrank by 0.1% in October, the latest figures from the Office for National Statistics (ONS) reveal. Economists had predicted a 0.1% growth, making this contraction a surprise. Over the three months leading to October, the economy also contracted by 0.1%.

Impact of Jaguar Land Rover Cyber-Attack

Production was hit by a cyber-attack at Jaguar Land Rover, which halted vehicle manufacturing in September. October saw only a slight recovery, with production output increasing by 1.1% month-on-month, still below August levels. Vehicle manufacturing fell 17.7% over the three-month period, dragging down overall production.

Services Sector Shows No Growth

The services sector, which makes up around 75% of the UK economy, did not grow at all over the three months to October. Retailers and professional services reported slower activity, affected by uncertainty ahead of the Budget.

Budget Uncertainty Slows Spending

Analysts say pre-Budget speculation dampened consumer and business spending. People delayed big purchases and investments, contributing to the weaker economic performance. Card Factory, a UK retailer, cited falling consumer confidence as it cut its profit forecast.

Economic Outlook and Interest Rates

Economists suggest the weaker data may encourage the Bank of England to cut interest rates in the coming meeting. Private sector investment, alongside government infrastructure plans, could help support growth into 2026. The government has pledged to boost growth through energy bill reductions and infrastructure spending.