Unexpected Dip in Economic Output

The UK economy recorded an unexpected slowdown in the period leading up to the Budget, according to new data from the Office for National Statistics (ONS). Gross domestic product (GDP) fell by 0.1% in October, defying forecasts from economists who had predicted modest growth of the same margin.

The broader picture was equally subdued, with the economy also shrinking by 0.1% over the three months to October, reinforcing concerns that momentum has stalled as the year draws to a close.

Car Production and Budget Uncertainty Weigh on Growth

One of the key drags on performance was continued disruption in vehicle manufacturing following a cyber-attack on Jaguar Land Rover. Although production resumed gradually in October after a full shutdown in September, the recovery was limited and remained well below August levels.

Analysts also pointed to uncertainty in the run-up to the Budget as a factor dampening both consumer spending and business investment, with many households and firms choosing to delay major financial decisions.

Rate Cut Expectations Intensify

The weaker-than-expected data has strengthened expectations that the Bank of England could cut interest rates at its next policy meeting. Economists say the prolonged softness in growth increases pressure on policymakers to provide stimulus.

Ruth Gregory, deputy chief UK economist at Capital Economics, said it was notable that the economy had expanded in only one of the past seven months, calling the latest contraction “another strong argument” for a rate reduction.

Government Defends Growth Strategy

Economic growth remains a central priority for the government. A Treasury spokesperson said ministers were focused on lifting output through measures such as lowering energy costs and investing in major infrastructure projects.

“We are determined to outperform pessimistic forecasts, create quality jobs, and ensure living standards improve, while also funding better public services,” the spokesperson said.

Political Blame Game Intensifies

Opposition figures were quick to criticise the government following the release of the figures. Shadow chancellor Sir Mel Stride argued that the contraction was the result of policy missteps and accused the chancellor of misleading the public on tax plans and the state of public finances.

He claimed the Budget had contributed to uncertainty and undermined confidence among businesses and consumers.

Manufacturing and Services Show Weakness

Over the three months to October, overall production output declined by 0.5%, largely driven by a sharp 17.7% drop in vehicle manufacturing.

While output across the production sector rose by 1.1% in October, the ONS said this rebound was modest and insufficient to offset earlier losses.

Meanwhile, the services sector—which accounts for around three-quarters of the UK economy—showed no growth at all during the three-month period, signalling broad-based weakness.

Economists Warn of Prolonged Soft Patch

Jack Meaning, chief UK economist at Barclays and a former adviser to the Bank of England, described the latest figures as evidence that the economy is “clearly underperforming.”

He said growth had slowed steadily throughout the year, shifting from early strength to outright contraction, adding that the recovery in car manufacturing was weaker and slower than expected.

Spending Put on Hold

Data from Barclays suggests uncertainty ahead of the Budget caused many consumers and businesses to postpone large purchases. Scott Gardner, investment strategist at JP Morgan Personal Investing, said speculation around tax changes had a “muting effect” on economic activity.

Retailers also felt the impact. Card and gift chain Card Factory