Britain’s economy contracted for the second consecutive month

Britain’s economy shrank for the second month in a row in October after official data showed a 0.1% decline.

The economy was expected to return to growth after a decline in September.

However, the Office for National Statistics (ONS) said activity has stalled or declined, with the pubs, restaurants and retail sectors reporting a “weak month”.

Chancellor Rachel Reeves said the figure was “disappointing”, but added: “We have put in place policies to deliver long-term economic growth.”

Shadow Chancellor Mel Stride said, “This decline in growth reflects the serious impact of the Chancellor’s decisions and persistent talk of weakening the economy.”

KPMG chief economist Yael Selfin said activity was “halted due to uncertainty ahead of the Budget on October 30” as businesses and consumers held off spending.

But some industries, such as real estate, law firms and accountancy, stepped up work before Reeves announced the budget, the ONS said.

The economy has grown only once in the past five months, according to Capital Economics, and that’s 0.1% less than before Labor won the election in July.

“This shows it’s not just the budget that’s holding the economy back,” said Paul Dales, Capital’s chief UK economist.

“Instead, the pressure from higher interest rates may persist longer than we thought.”

The Bank of England has cut interest rates twice this year, but at 4.75%, they are still relatively high compared to recent years.

The bank will meet next week to decide on a final interest rate for 2024, although borrowing costs are not widely expected to fall again until next year.