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.
Money latest: Klarna fined for breaching anti-money laundering rules
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.
SLOWING ECONOMY MAY BOLSTER PACE OF RATE CUTS
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.
Please use Chrome browser for a more accessible video player
CBI chief’s approach to budget tax shock
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.
Please use Chrome browser for a more accessible video player
HMV owner slams budget ‘burden’
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.”
Read more from Sky News:
Royal Mail handed big fine for missing targets
Telegraph hands out bonuses amid ownership uncertainty
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.”
The first-ever Capture case has been delayed at the Court of Appeal as the Post Office asks for an extension to respond, Sky News has learned.
Pat Owen, a former sub postmistress who has since passed away, was convicted of stealing in 1998 based on evidence from computer software.
The system, known as Capture, was used in up to 2,500 branches in the 1990s, before the infamous Horizon system was introduced.
Hundreds of sub-postmasters were wrongfully convicted between 1999 and 2015 as part of the Horizon scandal.
Earlier this year, Sky News unearthed a 1998 report showing the Capture software was also faulty.
That report, commissioned by the solicitors acting for Mrs Owen in 1998, was served on the Post Office and may never have been seen by the jury in her case.
Please use Chrome browser for a more accessible video player
‘All we want is her name cleared’
Ms Owen was given a suspended prison sentence and fought to clear her name subsequently – but died in 2003.
Her case was referred by the Criminal Cases Review Commission (CCRC) to the Court of Appeal in October.
The Post Office had until 5 December to respond to papers put forward by Mrs Owen’s defence team but they have now asked for an extension until 30 January.
Ms Owen’s daughter, Juliet Shardlow, described the family’s suffering at the lengthening wait.
“I need to emphasise the profound impact the ongoing delay is having on our family,” she said.
“The continuous uncertainty only compounds our heartache, stress, and anxiety.
Please use Chrome browser for a more accessible video player
Alan Bates: New redress scheme ‘half-baked’
“It has become the last thing I think about before I go to sleep and the first thing when I wake up.
“We have waited 27 years for justice, and this additional wait feels never-ending.”
Ms Owen’s case is the first time a conviction based on Capture has reached the Court of Appeal since the scandal was exposed.
Read more from Sky News:
Corporate manslaughter charges considered in Post Office scandal
21 ‘Capture’ cases investigated for miscarriages of justice
Lawyers have said that if Ms Owen is exonerated posthumously, it may “speed up” the handling of others.
CCRC chair Dame Vera Baird also told Sky News in the summer it could be a “touchstone case” for other victims.
The CCRC is also continuing to investigate around 30 other “pre-Horizon” convictions.
A Post Office spokesperson said: “We have sought an extension of time to fully consider and respond to the CCRC’s Statement of Reasons in Ms Owen’s case.
“We deeply regret the impact our request for further time will have on Ms Owen’s family.
“We have a duty to carefully consider the evidence presented in the Statement of Reasons submitted by the CCRC and do everything we can to fully assist the Court when it considers this conviction.”
Meanwhile, the first-ever redress scheme for victims of the Post Office Capture IT scandal was launched this autumn.
The Capture Redress Scheme will provide payments of up to £300,000, and more in “exceptional” cases, to former postmasters who suffered financial losses.
-
Sports2 years agoStory injured on diving stop, exits Red Sox game
-
Sports3 years ago‘Storybook stuff’: Inside the night Bryce Harper sent the Phillies to the World Series
-
Sports2 years agoGame 1 of WS least-watched in recorded history
-
Sports3 years agoButton battles heat exhaustion in NASCAR debut
-
Sports3 years agoMLB Rank 2023: Ranking baseball’s top 100 players
-
Sports4 years ago
Team Europe easily wins 4th straight Laver Cup
-
Environment3 years agoJapan and South Korea have a lot at stake in a free and open South China Sea
-
Environment1 year agoHere are the best electric bikes you can buy at every price level in October 2024