UK economy unexpectedly declines as services sector stalls

The UK economy unexpectedly contracted in October, marking two months in a row of negative growth for the first time since the pandemic, new figures show.

Chancellor Rachel Reeves said she was “disappointed” by the data after a weak month for pubs and restaurants dragged on growth amid some uncertainty ahead of the autumn Budget.

The Office for National Statistics (ONS) said gross domestic product (GDP) contracted 0.1% in October.

Most economists had been expecting GDP to rise by 0.1% during the month.

The latest figures from the ONS follow a 0.1% estimated fall in September – meaning it is the first time the economy has contracted for two consecutive months since March and April 2020, during the onset of the Covid-19 pandemic.

It marks a fractional shift in the outlook for the economy after it eked out 0.1% growth over the latest quarter, between July and September.

The ONS said the services sector recorded no growth in October after also stalling in September.

Liz McKeown, the ONS’s director of economic statistics, said: “The economy contracted slightly in October, with services showing no growth overall and production and construction both falling.

“Oil and gas extraction, pubs and restaurants and retail all had weak months, partially offset by growth in telecoms, logistics, and legal firms.

“However, the economy still grew a little over the last three months as a whole.”

The Chancellor said: “We are determined to deliver economic growth as higher growth means increased living standards for everyone, everywhere. This is what our Plan for Change is all about.

“While the figures this month are disappointing, we have put in place policies to deliver long-term economic growth.”

The ONS’s monthly business survey showed signs of a mixed response ahead of the autumn Budget announcement at the end of the month.

Some industries, like manufacturers, retailers and recruiters, said turnover was affected as they waited for the outcome of the tax-setting statement.

Others, like real estate and legal services, were more positive and increased activity in the run-up, according to the ONS.