The UK economy has recorded back-to-back contractions in October, sparking economic concerns. The unexpected decline has raised questions about the country’s growth prospects, with some industries affected more than others.
The UK economy shrank for the second consecutive month in October, according to official figures released by the Office for National Statistics (ONS). This unexpected decline has sparked concerns about the country’s economic growth prospects.
The economy had been expected to return to growth following a fall in September. However, the ONS reported that activity had stalled or declined across various sectors, including pubs, restaurants, and retail.
The report highlighted that some industries were affected more than others by the economic downturn. Pubs, restaurants, and retail businesses experienced weak months, while other sectors such as real estate, law firms, and accountancy saw an increase in activity ahead of the Budget announcement.
Chancellor Rachel Reeves acknowledged the disappointing figure but emphasized that her government has implemented policies aimed at delivering long-term economic growth. Shadow chancellor Mel Stride criticized the government’s decisions, stating that they have had a stark impact on the economy.
KPMG’s chief economist Yael Selfin attributed the decline in activity to uncertainty ahead of the Budget announcement, which led businesses and consumers to hold back on spending. However, Capital Economics’ chief UK economist Paul Dales suggested that higher interest rates may be a more significant factor holding back the economy.
The UK economy has grown only once over the past five months, with a 0.1% decline compared to before Labour won the election in July. This trend raises concerns about the country’s economic performance and the impact of government policies on growth.
The Bank of England will meet next week for its final interest rate decision of 2024. Although it is not expected to reduce borrowing costs again until next year, the outcome may still have a significant impact on the economy.
