8:34 am, December 13, 2023
The UK economy shrank by 0.3% in October – a figure that was more than was expected.
Poor weather during the month blighted the manufacturing and construction sectors, dragging down GDP (gross domestic product).
The 0.3% fall followed a 0.2% drop in September, latest figures from the Office for National Statistics reveal.
It came as all three of the main sectors that the ONS tracks fell into negative territory for the first time since July. Economists had expected GDP to contract by just 0.1%.
‘October … saw contractions across all three main sectors,’ said ONS director of economic statistics, Darren Morgan.
‘Services were the biggest driver of the fall with drops in IT, legal firms and film production – which fell back after a couple of strong months.
‘These were also compounded by widespread falls in manufacturing and construction, which fell partly due to the poor weather.’
While the larger services sector contributed the most to the slowdown in October, the production sector fell the most rapidly.
It saw output down by 0.8% thanks to a slowdown in manufacturing caused in part by the computer, electronics and optical products sectors.
Meanwhile, the construction sector was hit by one of the rainiest Octobers in the last 200 years.
The worse-than-expected reading comes as the Bank of England is to set a new interest rate on Thursday.
Decision-makers at the Bank were already unlikely to raise interest rates at this week’s meeting. The ONS data will give them even more certainty that rates are high enough to be ‘restrictive’ and dampen the economy.
Chancellor of the exchequer Jeremy Hunt said: ‘It is inevitable GDP will be subdued whilst interest rates are doing their job to bring down inflation.
‘But the big reductions in business taxation announced in the autumn statement mean the economy is now well placed to start growing again.’
