The UK economy unexpectedly contracted by 0.1% in October, with analysts attributing the decline to speculation over tax rises and a series of leaks ahead of the November 26 Budget, reports The WP Times with reference to the Standard. The figures indicate that the economy has not grown since June, marking the ninth monthly contraction since the Labour government took office in July 2024.

According to the Office for National Statistics, construction activity fell by 0.6% month-on-month, while the services sector declined by 0.3%. Economists had forecasted modest growth of 0.1% for October, making the actual contraction a notable shock. In the preceding weeks, multiple leaks concerning potential tax cuts and fiscal plans had heightened market uncertainty.

Experts argue that the weak growth was largely driven by prolonged uncertainty around the Budget. Andy Haldane, former Chief Economist at the Bank of England, noted that worries over the Budget and possible tax hikes had led businesses and consumers to delay investments and spending decisions.

Shadow Chancellor Rachel Reeves criticized the numerous leaks in the run-up to the Budget, describing the speculative reports as “very damaging.” Senior Conservative Shadow Minister Sir Mel Stride blamed the Budget for the unexpected contraction and argued that Labour lacked a clear economic plan, focusing instead on political priorities.

Business leaders in London expressed concerns about rising employment costs, inflation, and geopolitical uncertainty. Muniya Barua, Deputy CEO of BusinessLDN, stated that Budget uncertainty weighed heavily on the economy in October, and called for government action to restore business confidence. She recommended advancing major infrastructure projects, reforming the business rates system, and using the proposed overnight levy in London to support growth.

ONS Director of Economic Statistics Liz McKeown highlighted continued weakness in car manufacturing, noting only a slight recovery in October from the significant output decline in September. A Treasury spokesperson emphasized that the government remains committed to driving growth and creating jobs through measures such as reducing energy bills by £150, maintaining record infrastructure investments, supporting major planning reforms, expanding Heathrow and Gatwick airports, and building Sizewell C.

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