The UK economy contracted by 0.1% in October 2025, surprising economists who had forecast modest growth and intensifying pressure on policymakers and markets. Official figures from the Office for National Statistics (ONS) show this marks the second consecutive month of decline following a similar 0.1% drop in September and no growth in August.
ONS data revealed that the downturn was broad-based, with the services sector — which accounts for the majority of UK economic activity — stagnating, construction output falling, and production only modestly up. Analysts pointed to businesses and consumers holding back spending ahead of November’s Budget announcement, dampening demand and contributing to the surprise contraction.
The disappointing figures came amid anticipation over Chancellor Rachel Reeves’s Autumn Budget, which included significant tax changes and fiscal measures intended to balance public services and growth objectives. Some economists and business commentators linked the weak performance to uncertainty around tax policy and market reactions to Budget leaks, which may have delayed investment and hiring decisions across key sectors.
Manufacturing has also faced challenges, including a lingering impact from a cyberattack on Jaguar Land Rover earlier in the autumn, which constrained automotive output. Independent economists say that without a stronger rebound in consumer demand and business confidence, the economy risks further sluggishness into the final quarter of 2025.
The poor GDP performance has sparked fresh speculation about Bank of England policy, with markets increasingly pricing in a potential interest rate cut at the December Monetary Policy Committee meeting to support growth and ease credit conditions. However, persistent inflation above target adds complexity to policymakers’ decisions.
Opposition figures seized on the data to criticise the government’s economic stewardship, while Treasury officials defended their strategy, emphasising long-term jobs and investment goals. Economists stress that a single month’s contraction doesn’t necessarily signal a recession, but the trend of weak growth remains a notable concern for investors, firms, and households alike.
