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Recent data from the Office for National Statistics (ONS) revealed an unexpected contraction in the UK economy in October, with a 0.1% decline rather than the 0.1% growth that economists had anticipated. This downturn extended to the three-month period ending in October, which also saw a 0.1% reduction in overall economic output. The impact of a cyber-attack on Jaguar Land Rover notably disrupted vehicle production, leading to only a modest recovery in October following a sharp fall in the previous month. Experts also pointed to uncertainty surrounding the upcoming Budget as a significant factor dampening consumer and business spending.
The government continues to emphasize economic growth as a central objective. A Treasury spokesperson highlighted ongoing efforts to stimulate growth through measures such as lowering energy costs and investing heavily in infrastructure projects. They stated, “We are determined to defy the forecasts on growth and create good jobs, so everyone is better off, while also helping us invest in better public services.” Meanwhile, political opposition criticized the recent performance; Shadow Chancellor Sir Mel Stride held the Budget responsible for the economic setback, attributing it to what he called “Labour’s economic mismanagement.” Stride accused Labour of breaking tax promises and misleading the public about the state of public finances.
Analysts interpreted the data as reinforcing the likelihood that the Bank of England will cut interest rates at its forthcoming meeting. Ruth Gregory, deputy chief UK economist at Capital Economics, remarked that the unexpected contraction served as “a further reason to expect the Bank of England to cut interest rates next Thursday,” emphasizing that the economy had only expanded in one of the past seven months. The industrial sector faced particular difficulties, with production declining by 0.5% over three months, primarily driven by a 17.7% plunge in vehicle manufacturing output due to the cyber-attack on Jaguar Land Rover’s UK factories. Although production resumed gradually from early October, the recovery was limited, leaving vehicle output still substantially below August levels. The services sector, encompassing professional services and retail, showed no growth during this period.
Further commentary from economists highlighted the broader economic weaknesses underlying the figures. Jack Meaning, Barclays’ UK chief economist and former Bank of England adviser, described the data as evidence that the economy was “unambiguously weak,” noting a continued slowdown in growth throughout the year culminating in contraction. He suggested that the anticipated quick rebound from Jaguar Land Rover’s production halt had not materialized and that uncertainty related to the Budget had discouraged spending. Investment strategists and economists echoed these views, with JP Morgan’s Scott Gardner noting that Budget speculation had “a numbing effect” on spending decisions. Although the government increased its financial buffer in the Budget—something that could reduce future uncertainty—the impact on economic performance remains uncertain. On a more optimistic note, KPMG UK’s chief economist Yael Selfin expressed hope that both private and public sector investment “could help foster growth over the coming year,” predicting that investment will continue to play a key role in driving growth into 2026
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