UK economy shrinks 0.1% in October

12th Dec 2025 07:37

(Sharecast News) - The UK economy unexpectedly contracted in October amid uncertainty ahead of the Budget, according to figures released on Friday by the Office for National Statistics.

The economy shrank 0.1% following a 0.1% decline in September and no growth in August. Economists had been expecting growth of 0.1%.

Services saw a 0.3% decline, while construction fell by 0.6%, but production grew by 1.1% in October.

ONS director of economic statistics Liz McKeown said: "The economy contracted slightly in the latest three months, as production fell again and services growth stalled.

"Within production, there was continued weakness in car manufacturing, with the industry only making a slight recovery in October from the substantial fall in output seen in the previous month.

"Overall services showed no growth in the latest three months, continuing the recent trend of slowing in this sector. There were falls in wholesale and scientific research, offset by growth in rental and leasing and retail."

Berenberg economist Andrew Wishart said: "The UK economy has faltered more dramatically than we expected. The 0.1% mom fall in monthly GDP in October (consensus forecast +0.1% mom) extends the cumulative decline in output since June to 0.4%. The more recent survey data suggests that the malaise has continued since. We suspect that deteriorating fundamentals rather than a Budget-related setback in confidence are to blame, so a recovery seems unlikely in the near term.

"This should help ensure that inflation drops swiftly in 2026, allowing the Bank of England to cut bank rate from 4.00% today to 3.00% by next July. The first of these reductions will likely come next Thursday 18 December. Lower BoE rates should then pave the way for a rebound in growth over the course of 2026."