The UK economy experienced a 0.1% contraction in October 2024, marking the second consecutive month of economic decline. This disappointing result comes amid ongoing concerns about the government's budget plans and its impact on business confidence.

Economic Decline Amid Budget Uncertainty

Official data from the Office for National Statistics (ONS) revealed a drop in economic activity, with key sectors such as pubs, restaurants, and retail reporting weak performance. Despite hopes for a recovery following a fall in September, the UK economy failed to bounce back, signaling a continuing slowdown.

Chancellor Rachel Reeves described the result as "disappointing" but emphasized that long-term economic growth strategies were in place. However, opposition critics, including Shadow Chancellor Mel Stride, blamed the government's policies for stalling growth and undermining confidence in the economy.

Business and Consumer Confidence Impacted by Budget Concerns

KPMG's chief economist, Yael Selfin, attributed the economic stagnation to uncertainty surrounding the UK Budget, which led businesses and consumers to delay spending. However, some industries, such as real estate, law firms, and accountancy, accelerated work ahead of the budget announcement, as noted by the ONS.

A consumer confidence survey by market research firm GfK found that while people were slightly more optimistic about their personal finances in the coming year, their views on the overall economy remained unchanged. GfK's Neil Bellamy noted that continued pessimism about the UK's economic situation was dampening consumer confidence.

UK Economy Struggles Despite Labour's Election Win

Since Labour's election victory in July, the UK economy has grown only once in the past five months. The latest data shows that GDP is 0.1% lower than before Labour's win, leading economists to suggest that the impact of higher interest rates is contributing to the prolonged economic slowdown.

The Bank of England has already cut interest rates twice this year, but at 4.75%, they remain high compared to historical levels. Economists believe the Bank is unlikely to reduce borrowing costs again until 2025.

Slowdown in Key Sectors: Manufacturing and Construction Decline

Over the three months to October, the UK economy showed minimal growth, expanding by just 0.1%. The manufacturing sector saw the steepest decline, dropping by 0.6%, while construction fell by 0.4%. The services sector, which constitutes the largest part of the UK economy, showed no growth at all.

Keir Starmer’s Vision for Economic Growth

Labour leader Keir Starmer has pledged to achieve the highest sustained economic growth among the G7 nations. Last week, he introduced new “milestones” to track the government's progress, including a focus on increasing real household disposable income for UK citizens.

Source: bbc.co.uk