The UK economy stumbled and shrank for the second month in a row through October as concerns about the Budget continued to drag business confidence down.
The downturn represents the first back-to-back falls in output since the coronavirus pandemic began and a setback for new Chancellor of the Exchequer Rachel Reeves who rushed through painful tax increases in her recent first budget.
Official figures showed gross domestic product (GDP) contracted by 0.1 percent during the month, according to the Office for National Statistics (ONS), following a 0.1 percent decline in September, as Prime Minister Sir Keir Starmer’s left-wing Labour government passed 100 days in office.
The slump was most marked in Britain’s dominant services sector which showed no growth as the production and construction industries also contracted.
The BBC notes activity had stalled or declined with pubs, restaurants, and retail among sectors reporting “weak months.”
With this second straight contraction, Britain has edged closer to a potential recession which is defined as happening when a country experiences two quarters of consecutive negative growth.
Reeves said the figure was “disappointing”, but added: “We have put in place policies to deliver long-term economic growth.”
KPMG’s chief economist Yael Selfin told the BBC activity was “held back by uncertainty ahead of the Budget on 30 October” as businesses and consumers held back on spending.
The UK economy has grown just once over the past five months, according to Capital Economics, and is 0.1 percent lower than before Labour won the election in July.
“That suggests it’s not just the Budget that is holding the economy back,” said Capital’s chief UK economist Paul Dales.
“Instead, the drag from higher interest rates may be lasting longer than we thought.”
The Bank of England has cut interest rates twice this year but, at 4.75 percent, they are still relatively high compared with recent years.
News of another economic setback comes a week after the prime minister downgraded a pre-election vow to secure the highest economic growth in the G7 to an “aim”.
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