UK economy unexpectedly shrinks in October

A man walks along the South Bank with high-rise buildings in the financial district visible in the background, early morning in central London on December 12, 2025.(Photo by Henry NICHOLLS / AFP)

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Britain’s economy unexpectedly contracted again in October, according to official data released on Friday, dealing a blow to the Labour government’s hopes of reviving economic growth.

Gross domestic product fell 0.1 per cent in October following a contraction of 0.1 per cent in September, the Office for National Statistics said in a statement.

Analysts had forecasted growth of 0.1 per cent.

Manufacturing rebounded in the month as carmaker Jaguar Land Rover resumed operations after a cyberattack that had weighed on the UK economy in September.

But analysts noted that businesses and consumers reined in spending ahead of Britain’s highly expected annual budget.

“Business and consumers were braced for tax hikes and the endless speculation and leaks have once again put a brake on the UK economy,” said Lindsay James, investment manager at Quilter.

Prime Minister Keir Starmer’s Labour Party raised taxes in last month’s budget to slash state debt and fund public services.

At the same time, Britain’s economic growth was downgraded from next year until the end of 2029, according to data released alongside the budget.

Finance minister Rachel Reeves raised taxes on businesses in her inaugural budget last year — a decision widely blamed for causing weak UK economic growth and rising unemployment.

She returned in November with fresh hikes, this time hitting workers.

Analysts said that Friday’s data strengthened expectations that the Bank of England would cut interest rates next week.

AFP

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