Financial News: UK Economy Unexpectedly Shrinks In October

UK Economy Unexpectedly Shrinks In October

12/12/2025 - 07:21:00 (RTTNews)

(RTTNews) - The UK economy experienced an unexpected contraction in October, as uncertainty ahead of the Autumn budget dampened spending and investment, official data revealed on Friday.

Gross domestic product fell 0.1 percent month-on-month in October, the same pace of drop as seen in September, the Office for National Statistics reported. GDP was forecast to grow 0.1 percent.

The monthly fall was driven by a 0.3 percent contraction in the services sector and a 0.6 percent drop in construction. In contrast, industrial production grew 1.1 percent.

On an annual basis, GDP was up 1.1 percent in October, which was weaker than forecast of 1.4 percent.

In the three months to October, real GDP was down 0.1 percent, following a 0.1 percent expansion in the three months to September.

There is little festive cheer for businesses in the latest GDP data, British Chambers of Commerce Research Manager Stuart Morrison said. "The data paints a particularly worrying picture on the services sector, which is usually a real strength of the UK economy," Morrison added.

The BCC today lifted its economic growth outlook for this year to 1.4 percent from 1.3 percent as public spending remained strong. However, growth is seen at 1.2 percent in 2026 and 1.5 percent in 2027.

The Confederation of British Industry also raised its 2025 growth projection to 1.4 percent from 1.2 percent. Growth outlook for 2026 was lifted to 1.3 percent from 1.0 percent despite weak demand, elevated labor and energy costs and ongoing uncertainty.

The lobby cited a temporary boost to government expenditure following the Autumn Budget as reason for the upward revision. Moderate GDP growth of 1.5 percent is expected through 2027.

Today's data supports the call for another interest rate cut. The Bank of England is expected to cut the benchmark rate by 25 basis points to 3.75 percent next week.

Another data from ONS today showed that the visible trade deficit widened to GBP 22.5 billion in October from GBP 18.9 billion in September. The deficit was expected to rise moderately to GBP 19.1 billion.

The surplus on trade in services totaled GBP 17.7 billion compared to GBP 17.8 billion in the previous month.

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