The UK’s economy contracted unexpectedly in October, as the autumn budget cast a shadow of uncertainty ahead of Rachel Reeves’ statement on 26 November.
Office for National Statistics (ONS) data showed UK GDP slipping 0.1% month on month, confounding City forecasts of a 0.1% expansion. The decline followed a 0.1% fall in September and flat output in August, evidence of what economists describe as a protracted period of stagnation.
Services, which account for more than 80% of economic output, registered no growth in October. The latest reading also undershot polling of economists, who had pencilled in a 0.1% rise.
Liz McKeown, director of economic statistics at the ONS, said: “The economy contracted slightly in the latest three months as production fell again and services growth stalled.” She added: “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.”
The figures come after a 0.1% decline in September, when a halt in Jaguar Land Rover production dealt a blow to the manufacturing sector.
An HM Treasury spokesperson said: “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.
“That is why the chancellor is taking £150 off energy bills, protecting record investment in our infrastructure, and we are backing major planning reforms, the expansion of Heathrow and Gatwick airports, and the construction of Sizewell C.”
Many businesses have recently indicated that activity in the economy slowed in the lead up to the budget, delivered on November 26, as speculation over possible tax measures grew.
In its GDP report, the ONS write: “Businesses across the production, construction and services sectors reported that they, or their customers, were waiting for the outcome of the autumn budget 2025 announcement on 26 November 2025.
“These comments came from a range of industries, but were mainly from manufacturers, construction companies, wholesalers, computer programmers, real estate firms and employment agencies.”
Read more: What is a recession and what does it mean for me?
The data showed the UK economy has not grown since June, with GDP either flat or falling in the past four months.
Neil Birrell, chief investment officer at Premier Miton Investors, said it is time for bosses to worry about recession. He explained: “The malaise that hung over the UK economy ahead of the budget is evidenced by October’s GDP numbers, when the economy shrank. This was an outcome that was much worse than expected, but probably shouldn’t be a surprise given what we are hearing and seeing now.