UK economy shrinks unexpectedly

8 hours ago 2

The UK economy contracted by 0.1% in October, according to official figures.

The surprise fall in gross domestic product (GDP) comes after a similar unexpected 0.1% drop in September and 0% growth in August.

Economists polled by the Reuters news agency had predicted that October GDP would grow by 0.1%.

It comes after commentators warned that consumer spending was likely to be restrained in the run-up to the budget, amid concerns about the impact of the chancellor's potential measures on households.

The fall in growth was reported by the Office for National Statistics (ONS).

It said that during October, the UK's services sector fell by 0.3%, while construction was down 0.6%. However, production grew by 1.1%.

The ONS found that GDP on a rolling three-month basis, to October, also fell by 0.1%.

Scott Gardner, from banking giant JP Morgan, said: "Despite expectations of a return to growth in October, UK GDP contracted at the start of autumn as the economy battles a period of inconsistent productivity.

"Speculation about potential budget announcements had a numbing effect on consumers and businesses in the lead up to the chancellor's speech at the end of November."

Suren Thiru, from the Institute of Chartered Accountants in England and Wales, said the surprise data increased the likelihood of the Bank of England cutting interest rates next week.

He said: "With these downbeat figures likely to further fuel fears among rate-setters over the health of the UK economy, a December policy loosening looks nailed on, particularly given the likely deflationary impact of the budget."

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