The U.K. economy contracted by 0.1% in the three months to October, defying economists’ expectations for flat growth and signaling renewed strain on the country’s recovery.
The latest figures follow a 0.1% expansion in the previous three-month period, highlighting how fragile economic momentum has become.
The Office for National Statistics said services output stalled while construction fell 0.3% and production declined 0.5%, largely due to reduced manufacturing of motor vehicles and trailers.
The data arrives just weeks after Chancellor Rachel Reeves announced a series of tax increases in her recent Budget, aimed at addressing what she described as a financial “black hole.”
Economists have expressed concern over the disappointing figures, noting that even modest expectations were not met.
“October’s GDP underscores just how much difficulty the U.K. economy is going through as the government searches for some sort of growth,” said Lindsay James of Quilter.
“This figure also misses what were already low expectations and doesn’t bode well for next month’s figure either.”
With the Bank of England set to meet next week, the economic backdrop has added pressure on policymakers.
James said the new GDP numbers make it “increasingly likely the Bank of England will have to lower rates next week when it meets, but with inflation remaining persistently high, the pace at which subsequent cuts can be delivered remains questionable.”
The Bank of England’s Monetary Policy Committee will convene on December 18 and is widely expected to approve a quarter-point rate reduction to 3.75%.
Inflation has been gradually cooling, but the overall slowdown in the economy has pushed investors to anticipate a more accommodative stance.
Some analysts note that the central bank must carefully balance rate cuts with the risk of entrenching inflationary pressures.
Yael Selfin, chief economist at KPMG UK, said growth is likely to remain weak through the remainder of the quarter.
She warned that economic activity in November may also have been constrained by uncertainty around the Budget’s impact.
“Overall, we expect the GDP growth to be flat in the final quarter of this year,” she said.
The lack of momentum, combined with subdued business investment and cautious consumer spending, has raised concerns about the potential for the U.K. economy to slip closer to recession.
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