UK economy contracts for second month running in October

The UK’s economy contracted for the second month running in October, defying expectations for a rebound as car manufacturing only made a slight recovery from the Jaguar Land Recovery cyberattack.

The Office for National Statistics (ONS) said gross domestic product (GDP) fell 0.1% in October, following a 0.1% decline in September.

Most economists had been expecting a rise of 0.1% for October on hopes of a manufacturing bounceback led by Jaguar Land Rover’s (JLR) recovery from a major hack.

The data shows the UK economy has now not grown since June, with GDP either flat or falling in the past four months.

Many businesses have recently indicated that activity in the economy slowed in the lead-up to the Budget, delivered on November 26, as speculation over possible tax measures grew.

In the three months to October, the economy shrank by 0.1% after growth of 0.1% in the three months to September.

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.”

The data revealed that month-on-month activity in car production jumped 9.5% higher in October, but this was only a partial recovery from the 28.6% plunge in September as the JLR cyberattack sent shockwaves through the sector.

Car production activity remained 21.8% lower than in August.

JLR was forced to pause production of its cars for more than a month after being targeted by hackers, having a knock-on impact for the wider sector and resulting in a costly recovery.

It gradually resumed production through October.

Experts said speculation around the Budget compounded the woes at JLR, with output down 0.3% across the dominant services sector and 0.6% for construction.

Barret Kupelian, chief economist at PwC, said: “Some of this weakness still reflects the cyberattack on Jaguar Land Rover, which knocked car output earlier in the autumn, but the bigger story is that speculation around the autumn Budget kept households and businesses in wait-and-see mode.

“Given the timing of the Budget, November’s GDP print is likely to look similarly subdued before any post-Budget effects start to show up.”

A Treasury spokesperson said: “We are determined to defy the forecasts on growth and create good jobs, so everyone is better off, while also helping us invest in better public services.”