The economy remained in a 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.
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.
There has been strong evidence, since the election, of a hit to sentiment as a result of the warning in data outside official growth figures, covering things like consumer spending and wage awards.
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 tax income.
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.
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.
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.”
(c) Sky News 2024: UK economy shrinks again in October, official figures show
