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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.

SLOWING ECONOMY MAY BOLSTER PACE OF RATE CUTS



Gurpreet Narwan

Business and economics correspondent

@gurpreetnarwan

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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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.

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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.”

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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.”

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Protesters throw powder on Tower Bridge during London Marathon

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Protesters throw powder on Tower Bridge during London Marathon

Two pro-Palestinian demonstrators have thrown red powder on Tower Bridge – just moments before leading runners in the London Marathon went past.

The protesters were arrested on suspicion of causing a public nuisance and remain in custody, said the Metropolitan Police.

A video shared by Youth Demand, which is calling for a trade embargo on Israel, shows two people jumping over a barrier that separates spectators from the race course.

The pair, wearing t-shirts that say “Youth Demand: Stop Arming Israel”, are then seen standing in the middle of the road on the bridge.

Pic: LNP
Image:
Pic: LNP

They throw red powder in the air as an official marathon car goes past displaying the race time.

A motorbike with a cameraman on board continues along the route, while a second motorbike stops and one of the riders gets off and pushes the pair out of the way, just before the men’s elite runners pass.

Several police officers then jump over the barrier and detain the pair, the footage shows.

More on London Marathon 2025

There appeared to be no impact on the marathon.

More than 56,000 participants were expected to take part in the 26.2-mile race through the capital.

Sabastian Sawe of Kenya won the men’s elite race in a time of two hours, two minutes and 27 seconds, while Ethiopia’s Tigst Assefa shattered the women’s-only world record in two hours, 15 minutes and 50 seconds.

Assefa beat the previous best of two hours, 16 minutes and 16 seconds set last year in London by Kenyan Peres Jepchirchir.

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Pic: LNP
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Pic: LNP

The Metropolitan Police said in a statement: “At around 10.38am, two protesters from Youth Demand jumped over barriers at Tower Bridge and threw red paint on to the road.

“Marathon event staff intervened to remove the protesters from the path of the men’s elite race which was able to pass unobstructed.”

The force added that they were “quickly supported by police officers who arrested the protesters on suspicion of causing a public nuisance”.

The Met said the paint “appeared to be chalk-based” and was not expected to “present a hazard to runners yet to pass this point”.

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Kemi Badenoch does not rule out local coalitions with Reform after next week’s council elections

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Kemi Badenoch does not rule out local coalitions with Reform after next week's council elections

Kemi Badenoch has not ruled out forming coalitions at a local level with Reform after the council elections next week.

Speaking to Sunday Morning with Trevor Phillips, the Conservative leader did however categorically rule out a pact with Nigel Farage’s party on a national level.

“I am not going into any coalition with Nigel Farage… read my lips,” she said.

However, she did not deny that deals could be struck with Reform at a local level, arguing that some councils might be under no overall control and in that case, “you have to do what is right for your local area”.

“You look at the moment, we are in coalition with Liberal Democrats, with independents,” she said. “We’ve been in coalition with Labour before at local government level.

“They [councillors] have to look at who the people are that they’re going into coalition with and see how they can deliver for local people.”

She added: “What I don’t want to hear is talks of stitch-ups or people planning things before the results are out. They have to do what is right for their communities.”

More on Electoral Dysfunction

A total of 23 councils are up for grabs when voters go to the polls on Thursday 1 May – mostly in places that were once deemed Tory shires, until last year’s general election.

It includes 14 county councils, all but two of which have been Conservative-controlled, as well as eight unitary authorities, all but one of which are Tory.

Ms Badenoch has set expectations low for the Tories, suggesting they could lose all the councils they are contesting.

The last time this set of councils were up for election was in 2021, when the Conservative Party was led by Boris Johnson who was riding high from the COVID vaccine bounce.

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Counter-terrorism police investigating after two women injured in Leeds

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Counter-terrorism police investigating after two women injured in Leeds

Counter-terrorism police are investigating after an incident involving a crossbow and a firearm left two women injured in Leeds.

Police were called to Otley Road at 2.47pm on Saturday to reports of a “serious incident involving a man seen with weapons”, West Yorkshire Police said.

Officers arrived at the scene to find two women injured – and a 38-year-old man with a self-inflicted injury. All three were taken to hospital, with the man held under arrest, but their injuries are not believed to be life-threatening.

“Two weapons have been recovered from the scene, which were a crossbow and a firearm,” Counter Terrorism Policing North East said in a statement.

The incident happened on the ‘Otley Run’ pub crawl, with one venue saying it was closed for the evening due to “unforeseen circumstances”.

Officers guard one of the crime scenes in Leeds
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Officers guard one of the crime scenes

Officers inside the cordon in Leeds
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Officers inside the cordon in Leeds

Counter Terrorism Policing’s statement added: “Due to the circumstances surrounding the incident, Counter Terrorism Policing North East have taken responsibility for leading the investigation with the support of West Yorkshire Police.

“Extensive enquiries continue to establish the full circumstances and explore any potential motivation.”

Home Secretary Yvette Cooper described it as a “serious violent incident” and said she was being kept updated by police.

“Thank you to the police and emergency services for their swift response,” she said. “My thoughts are with the victims and all those affected by this attack.”

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