The UK economy shrank for the second consecutive month in October, with GDP declining by 0.1%, according to the Office for National Statistics (ONS). This unexpected contraction, following September’s decline, highlights the challenges facing key sectors such as manufacturing, construction, and services, which all reported sluggish or negative growth. Pubs, restaurants, and retailers were among those hit hardest, struggling with weak consumer spending and persistent inflationary pressures. Small business owners like Rick Gaglio, who runs a menswear shop in Hitchin, described 2024 as a particularly tough year, with high prices and unseasonable weather compounding economic difficulties.
Chancellor Rachel Reeves acknowledged the disappointing figures but reaffirmed her government’s commitment to long-term economic growth through targeted policies. Meanwhile, Shadow Chancellor Mel Stride criticized the administration’s approach, blaming the contraction on policy missteps and its focus on negative economic rhetoric. Economists noted that uncertainty ahead of the October 30 Budget had caused both businesses and consumers to delay spending, exacerbating the downturn. Additionally, lingering effects of high interest rates, despite two cuts this year, are thought to have weighed on activity more heavily than anticipated.
While some industries, including real estate, law, and accountancy, reported increased activity from pre-Budget preparations, overall consumer confidence remains fragile. A survey by GfK revealed a slight uptick in optimism about personal finances for the year ahead, but views on the broader economic outlook remained stagnant. “It’s the continuing uncharitable view of the UK’s general economic situation that’s suppressing consumer confidence,” said Neil Bellamy of GfK.
As the Bank of England prepares its final interest rate decision for 2024, speculation about further cuts has been tempered by caution. With October’s GDP figures subject to potential revision and the economy growing by just 0.1% over the preceding three months, there is a faint glimmer of resilience. However, whether the government’s strategies will translate into sustainable recovery remains to be seen, as businesses and households continue to navigate a challenging economic environment.
