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Gross domestic product (GDP) declined by 0.1% month on month in October for the second consecutive time and below expectations of 0.1% growth.
GDP is estimated to have fallen largely because of a decline in production output; this follows a fall of 0.1% in September 2024.
Real GDP is estimated to have grown by 0.1% in the three months to October 2024, compared with the three months to July 2024, with growth in the services and construction sectors in this period.
ONS Director of Economic Statistics Liz McKeown 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.”
Anna Leach, Chief Economist at the Institute of Directors, said “It’s concerning to see a further growth disappointment for the UK, with all the major sectors showing falls in activity. October had seen the third successive decline in the IoD’s confidence measure for business leaders as businesses faced another month of damaging uncertainty in the run-up to the Budget. This provides a weak platform for Q4, and there is a risk that growth has gone into reverse in the private sector.
“As we head further into the festive season, and consumer confidence remains in the doldrums, many businesses are continuing the process of updating their business plans for the coming year to accommodate significant increases in employment costs. Unfortunately, as business finances have been under pressure for a considerable period, and monetary policy remains restrictive, the conditions for investment are also unfavourable. Investment is the key to driving up growth and living standards across the UK. Whilst there are welcome policy measures on the horizon which will over time improve the economic environment – from tax simplification to planning to industrial strategy – the recent blows to businesses have made the task of achieving stronger sustainable growth harder.”
Julian Jessop, Economics Fellow at the free market think tank the Institute of Economic Affairs, said “The second successive monthly fall in economic activity in October should put the UK firmly on recession watch. Indeed, output per head may already be falling for the second quarter in a row.
“The loss of momentum is not contained to the UK. Indeed, the manufacturing sector appears to be struggling even more in the rest of Europe, notably Germany and France.
“Nonetheless, the new government’s negative rhetoric over the summer and the anticipation of a tight Budget have damaged sentiment and encouraged many households and business to put spending, hiring and investment on hold.
“One of the few sectors to do well in October was legal services, suggesting that the Budget was at least good news for tax lawyers.
“The Budget itself was even tougher than expected. The large increases in spending, taxation and borrowing were bound to increase uncertainty. It is simply not possible to shift two per cent of national income from the private to the public sectors without disrupting the economy, especially given the gap in productivity between the two.
“There are some glimmers of light. The latest GfK survey suggests that consumer confidence actually improved in December, with sentiment on the outlook for personal finances turning positive again. Real incomes are still likely to recover further and unemployment is still low.
“But surveys of business confidence suggest that firms remain gloomy, even before the main increases in tax and other costs in the Budget kick in next April.
“The Bank of England’s staff forecast of 0.3 per cent growth in the fourth quarter is looking even more optimistic. Zero now seems more realistic. At some point, the Monetary Policy Committee will shift to worrying much more about the downside risks to growth and inflation – perhaps not next week, but soon.”