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Getty Images<\/span><\/div>\n<\/div>\n<\/figure>\nThe UK economy shrank for the second month in a row in October as concerns about the Budget continued to weigh on confidence. <\/p>\n
Official figures showed a 0.1% drop, despite expectations that the economy would return to growth after a fall in September.<\/p>\n
The Office for National Statistics (ONS) said that activity had stalled or declined with pubs, restaurants and retail among sectors reporting “weak months”.<\/p>\n
Chancellor Rachel Reeves said the figure was “disappointing”, but added: “We have put in place policies to deliver long-term economic growth.”<\/p>\n<\/div>\n
Shadow chancellor Mel Stride said: “This fall in growth shows the stark impact of the chancellor’s decisions and continually talking down the economy.”<\/p>\n
KPMG’s chief economist Yael\u202fSelfin said that activity was “held back by uncertainty ahead of the Budget on 30 October” as businesses and consumers held back on spending.<\/p>\n
But some industries, such as real estate, law firms and accountancy, brought forward work before Reeves announced the Budget, the ONS said.<\/p>\n
The economy has grown just once over the past five months, according to Capital Economics, and is 0.1% lower than before Labour won the election in July. <\/p>\n<\/div>\n “That suggests it’s not just the Budget that is holding the economy back,” said Capital’s chief UK economist Paul Dales.<\/p>\n “Instead, the drag from higher interest rates may be lasting longer than we thought.”<\/p>\n The Bank of England has cut interest rates twice this year but, at 4.75%, they are still relatively high compared with recent years.<\/p>\n The Bank will meet next week for the last interest rate decision of 2024, though it is not widely expected to reduce borrowing costs again until next year. <\/p>\n Simon Wells, chief European economist at HSBC, cautioned about placing too much emphasis on the reading for October.<\/p>\n It is an initial estimate of economic growth by the ONS and could be subject to “heavy revision”, he told the BBC’s Today programme.<\/p>\n “So just because it is -0.1% today doesn’t mean it is going to be that when more data has come in in a few months’ time.”<\/p>\n Over the three months to October, the economy expanded by 0.1%.<\/p>\n<\/div>\n The manufacturing industry recorded the sharpest drop in activity in October, down 0.6%, followed by construction which fell by 0.4%.<\/p>\n Meanwhile, the services sector, which makes up the bulk of the UK economy, stalled with zero growth.<\/p>\n Rick Gaglio, owner of menswear shop Twisted Fabric in Hitchin, Hertfordshire, said “people are still being cautious”, and added that prices are still comparatively high.<\/p>\n “That’s just down to inflation and customers are feeling those price increases,” he said.<\/p>\n<\/div>\n Mr Gaglio also said that retail sales were slow during the summer months due to wetter than usual weather.<\/p>\n “It’s been tough,” he said. “2024 generally for small businesses has been very, very tough and we just want to hear more good news, not bad news.”<\/p>\n Prime Minister Sir Keir Starmer has said he wants the UK to secure the highest sustained economic growth of the G7 group of rich nations.<\/p>\n Last week, he set out additional “milestones” to allow people to measure the government’s progress. On the economy, he has pledged to increase real household disposable income per person.<\/p>\n He also reiterated a promise to build 1.5 million homes in England. <\/p>\n<\/div>\n<\/div>\n![](\"https:\/\/www.bbc.com\/bbcx\/grey-placeholder.png\")
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<\/div>\n<\/div>\n<\/figure>\n‘People are still cautious’<\/h2>\n<\/p>\n
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