Britain’s economy shrank unexpectedly in the three months up to October. This lost momentum during the fraught run-up to the budget prepared by Finance Minister Rachel Reeves. The figure was according to data shared on Friday, 12 December, that underscored bets on the Bank of England’s anticipated interest rate cuts.
The Office for National Statistics said that gross domestic product contracted by 0.1% in the August-to-October 3-month period, where economists polled by Reuters had forecast a flat reading.
During October alone, the economy contracted by 0.1% against a 0.1% rise in the forecast. Meantime, single-month GDP figures tend to be volatile and prone to revision. Friday’s data release reflects that the economy hasn’t grown since June 2025.
Reeves faced a challenging economic backdrop when preparing her tax-raising budget, which she announced in November. Several weeks of speculation and media briefings had left investors, consumers, and businesses in a state of uncertainty.
Reeves was quoted as having criticised the series of leaks last week.
The Sterling Pound had fallen slightly against the U.S. Dollar. Meantime, the British government’s bond prices rose after last Friday’s data. The contraction reflected unexpectedly sharp declines in the dominant service sector besides construction.
Contractions, simultaneously recorded in both services and construction, indicate broad-based weakness. This potentially reflects uncertainty in the run-up to the budget, shared an associate economist at the National Institute of Economic and Social Research think tank.
Friday’s data, polled by Reuters, seems unanimous that the BoE’s expectation is that the economy is expected to grow by around 0.3% in the 4th quarter as a whole.
Economists polled by Reuters are unanimous that the BoE will cut interest rates on 18 December, whilst financial markets assign a roughly 90% probability.
Meantime, manufacturing output was impaired during September by a cyberattack on Jaguar Land Rover, which failed to recover as anticipated by economists.
