UK economy shrinks again in October, official figures show
The economy remained in reverse gear during October, according to official figures covering the month ahead of the government’s first budget.
The Office for National Statistics (ONS) said output fell 0.1% following the 0.1% decline recorded for the previous month.
It marked the first time since the COVID pandemic that the economy had shrunk for two consecutive months.
The figures showed zero growth in the powerhouse services sector, with manufacturing and construction declining at a pace of 0.6% and 0.4% respectively.
Economists had expected a positive headline figure.
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The data adds to the picture of a far more jittery economy during the second half of the year, in the wake of the general election.
Critics blame the government, accusing Sir Keir Starmer and his chancellor Rachel Reeves of a spectacular, early, own goal that spooked the public and businesses alike.
After three weeks in office, both warned of a “tough” budget to come on 30 October due to an inherited “£22bn black hole” in the public finances that a snap Treasury review had uncovered.
There has been strong evidence since then of a hit to sentiment as a result of the warning in data covering things like consumer spending and wage awards.
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The economy is now 0.1% smaller than it was before Labour came to power.
It’s been almost six months but the new government is yet to deliver on its promise to turbocharge economic growth.
The chancellor will today urge the public to be patient with her. The message will be: It will take a lot longer than six months to revive an economy that has been stagnating for a decade.
How confident should we be in her plan? On the one hand, falling inflation and interest rates should provide a more fertile environment for consumer spending and business investment.
The government’s plan to increase public investment should also boost demand in the economy and, if successful, lead to longer term sustained growth.
Yet, there are a number of risks. A big increase in business taxes next year will weigh on employment and growth.
Pubs, restaurants and retailers are already stagnating and that was before they reacted to the budget, which at the end of the month slapped them with a big increase in employers’ national insurance contributions..
The latest figures show output in consumer-facing services fell by 0.6% in October 2024, following growth of 0.4% in September 2024. Manufacturing also shrank by 0.6% as, across the economy, businesses went in ‘wait and see’ mode ahead of the budget. The risk is they didn’t like what they saw in the budget.
Then there is Trump and the risk of tariffs. Britain could escape the worst of the cross hairs but we will have to wait and see. If things go against us, it’s very possible that the Bank of England could soon start worrying more about weak growth than inflation, possibly a prelude – as we’ve seen in Europe – to a faster pace of interest rate cuts.
The economy, which had been the fastest-growing in the G7 between January and June, grew by 0.1% during the third quarter of the year.
Economists had been expecting a similar performance in the final three months of 2024 following a budget that largely spared working people additional pain but put businesses and those of wealthier means on the hook for extra taxes.
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Business has since accused the chancellor of hurting the very working people she wants to protect as measures, such as higher employer National Insurance contributions, will only lead to weaker pay growth, fewer jobs and higher prices as additional costs are passed on.
Employers also argue that the extra tax burden, along with tougher employee rights legislation, will hurt investment at a time when Labour has prioritised growth in the economy.
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Ms Reeves said the figures were “disappointing”, but defended the budget.
She said: “We have put public finances back on a stable footing, capped the rate of corporation tax at the lowest level in the G7, established a £70bn National Wealth Fund to drive growth in our towns and cities, launched a 10-year infrastructure strategy and are creating pension mega funds to boost investment in British businesses, infrastructure and clean energy.”
The chancellor added: “We are determined to deliver economic growth as higher growth means increased living standards for everyone, everywhere.”
Mel Stride, the shadow chancellor, said: “It is no wonder businesses are sounding the alarm.
“This fall in growth shows the stark impact of the chancellor’s decisions and continually talking down the economy.”
He went on to say that Labour was left “the fastest growing economy in the G7”, adding: “Because of their decisions, growth is now under serious pressure.
“The impact will be felt by families through higher taxes, fewer jobs, higher prices and higher interest rates.”
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The government has shifted the growth emphasis to the public sector through a jump in investment in services such as the NHS.
Ms Reeves is borrowing more to help fund that and insists the budget was a one-off to help fix pressing problems that were unfunded by her predecessor.
The Bank of England has said that the reaction of business to the budget tax hikes is its main area of concern when judging the prospects for inflation and economic growth.
Financial markets are expecting four interest rate cuts next year but no change when policymakers meet for the final time in 2024 next week.
Commenting on today’s figures Yael Selfin, chief economist at KPMG UK, said: “October activity was held back by uncertainty ahead of the budget, with consumer and business confidence near recent lows.
“The fourth quarter could see a weaker pace of growth, as businesses come to terms with the higher tax burden announced at the budget as well as rising geopolitical uncertainties.
“Nevertheless, we expect higher public spending to lift GDP growth next year, with lower interest rates providing some boost to private sector demand.”
A workman saved a seven-year-old boy from a burning car in the aftermath of a deadly crash caused by a suicidal ex-pilot, an inquest has heard.
The schoolboy’s rescue came following the collision on the M6, which killed former RAF man Richard Woods and four others, in October last year.
Last week a coroner ruled that Woods, 40, took his own life by deliberately driving his Skoda the wrong way down the motorway while drunk and hitting a Toyota Yaris head-on.
The driver of the Toyota, Jaroslaw Rossa, 42, was also killed, along with his two sons, Filip, 15, and Dominic, seven, and his partner Jade McEnroe, 33.
Cockermouth Coroner’s Court heard on Thursday that Ms McEnroe’s son was also in the car but survived after workman Gavin Walsh came to his rescue at the scene, which was near Tebay services in Cumbria.
In a statement to the inquest, Mr Walsh said he was a passenger in a transit van travelling to Scotland when he witnessed the crash.
He jumped out of the vehicle and used a jack to smash the rear windscreen of the Toyota and pulled the boy out of the burning vehicle.
Mr Walsh said: “We really did try, I can assure everyone we did our best. We only had minimal time.
“I saved a life that day and I hope never to witness anything like that again.”
He added that he has never stopped thinking about the boy, and said: “I hope we will meet again one day and I will give you a massive hug.”
At the time, the family were returning to Glasgow from a trip to Legoland in Windsor, Berkshire.
The inquest heard that Wood, who was travelling at a speed of at least 65mph, would have been charged with manslaughter had he survived.
Recording conclusions of unlawful killing, Cumbria assistant coroner Margaret Taylor said: “I found that Jaroslaw, Jade, Filip and Dominic died as a consequence of the unlawful acts of another driver.”
The inquest heard how Mr Woods, from Cambridgeshire, had served a distinguished 14-year career in the RAF and was a flight instructor for BAE Systems at the time of his death.
Jade McEnroe. Pic: Cumbria Constabulary
Dominic and Filip. Pic: Cumbria Constabulary
In Ms Taylor’s record of inquest, Mr Woods was said to have been experiencing “a number of stressors in his life” and had a “history of harmful use of alcohol”.
Following the crash, he was found to be nearly four times over the legal drink-drive limit and a two-thirds empty bottle of gin was found in his car.
On the day of his death, concerns had been raised over his behaviour at a work conference near Preston in Lancashire.
Mr Woods failed to return to his seat after lunch and was later spotted driving erratically and swerving across three northbound carriageway lanes on the M6.
After pulling onto the hard shoulder, he then proceeded to U-turn and drove southward on lane three.
Filip, Dominic and Jaroslaw Rossa. Pic: Cumbria Constabulary
Detective Sergeant Deborah Story, from Cumbria Police, told the inquest that Mr Woods would have been prosecuted on four counts of manslaughter had he lived.
She said hypothetical charges of murder were considered by detectives but not thought appropriate because of a lack of information that Mr Woods knew the family or anything that provided a link between them.
Ms McEnroe’s parents, Marie McEnroe and George McNellis, told the coroner they thought it was “murder”.
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A statement from the mother of Filip and Dominic, and the ex-wife of Mr Rossa, Kamila, was read out at the inquest.
She said Mr Rossa, known as Jarek, was born in Poland where they became a couple and went on to have three boys.
He loved playing computer games and had “lots of friends”, she said, and worked at the Wagamama restaurant in Silverburn, Glasgow.
She said she was “devastated” over the deaths, adding: “Our lives will never be the same.
“I am heartbroken at the passing of my beloved angels Filip and Dominic.”
Marie McEnroe said her daughter, a spa therapist, had been in a relationship with Mr Rossa for about two-and-a-half years.
She said Jade had been a “brilliant mother” to her only child, was “really happy” with Mr Rossa and it was “lovely chaos” when all the boys were playing together.
Ms McEnroe added: “Life changed forever that day”.
Ms Taylor praised the “selfless acts of bravery” from those in the aftermath of the collision, including Mr Walsh, who she said went towards the burning car “without hesitation for his own safety”.
The coroner added: “Without his swift response, Jade’s child would also have perished.”
Addressing the bereaved family members, she said: “Your loss is unimaginable but you have conducted yourself with dignity and I thank you for that. I wish you strength for the future.”
Anyone feeling emotionally distressed or suicidal can call Samaritans for help on 116 123 or email jo@samaritans.org in the UK. In the US, call the Samaritans branch in your area or 1 (800) 273-TALK.
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