GDP fell 0.1% in October – industry reaction

The UK economy unexpectedly contracted by 0.1% in October, data from the Office for National Statistics (ONS) shows, matching the 0.1% decline recorded in September.

Economists had anticipated growth of 0.1%. Quarter-on-quarter, the economy shrank by 0.1% in three months to October, primarily due to a decline in manufacturing and stalled services growth. Production output fell by 0.5% over three months, driven by a 17.7% decline in vehicle manufacturing.

ONS Director of Economic Statistics Liz McKeown said “The economy contracted slightly in the latest three months, as production fell again and services growth stalled.

“Within production, there was continued weakness in car manufacturing, with the industry only making a slight recovery in October from the substantial fall in output seen in the previous month.

“Overall services showed no growth in the latest three months, continuing the recent trend of slowing in this sector. There were falls in wholesale and scientific research, offset by growth in rental and leasing and retail.”

Mike Randall, CEO at Simply Asset Finance, saif “A small dip in growth in October underlines a simple truth: even in the face of relentless speculation and negativity ahead of the Autumn Budget, SMEs kept pushing forward.

“But with smaller firms still calling for support with energy bills a year on, that determination can only stretch so far before margins become unsustainable.

“To unlock the next phase of growth, we now need practical measures that ease cost pressures, back investment, and create an environment where entrepreneurial ambition is rewarded. Give SMEs the confidence and the tools, and they will do the heavy lifting for the UK’s recovery.”

Suren Thiru, ICAEW Economics Director, said “These figures confirm an off-colour October for the economy, with pre-Budget worries paralysing activity across key sectors, despite a boost to manufacturing from Jaguar Land Rover’s return to production.

“This dismal outturn may have been followed by a similarly turbulent November with the damage to business and consumer confidence from the frenzied speculation ahead of the Budget likely to have frozen wider economic activity.

“The aftereffects from the Budget may mean that the UK’s economic prospects are poorer over the near term, with the growing tax burden and a weakening jobs market likely to keep growth notably lower than the OBR expects.

“With these downbeat figures likely to further fuel fears among rate-setters over the health of the UK economy, a December policy loosening looks nailed on, particularly given the likely deflationary impact of the Budget.”