UK Economy Contracts 0.1% in October Amidst Pre-Budget Uncertainty
The UK economy contracted by 0.1% in October, marking the fourth consecutive month without growth, as sectors like services and construction declined ahead of the Chancellor's budget announcement.
The UK economy contracted by 0.1% in October, according to the Office for National Statistics (ONS), marking the fourth consecutive month without growth. This decline was driven by a 0.3% fall in the services sector and a 0.6% decrease in construction output.
Economists had anticipated a modest return to growth; however, the unexpected contraction has intensified speculation about potential monetary policy adjustments. The Bank of England's Monetary Policy Committee is scheduled to meet on December 18, with markets assigning a 90% probability to a rate cut.
The ONS noted that the economy also shrank by 0.1% in the three months to October, the first such decline since December 2023.
The Confederation of British Industry (CBI) has raised its UK economic growth forecast for 2026 to 1.3%, up from 1.0% previously, attributing the increase to a temporary boost in government spending following Finance Minister Rachel Reeves' recent tax-raising budget.
The British pound weakened following the release of the GDP data, dropping slightly to $1.338 and also weakening against the euro to 87.72 pence.
The Bank of England is expected to cut interest rates by 25 basis points to 3.75% on December 18, 2025, according to a Reuters poll of 64 economists.
Source
CNBCFirst reported
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