The UK economy recorded an unexpected decline in the three months to October, according to new figures from the Office for National Statistics. The data shows that gross domestic product fell by 0.1% over the August to October period, defying expectations of flat growth and reinforcing market expectations of an imminent interest rate cut by the Bank of England.

October alone saw economic output decline by 0.1%, contrary to forecasts which had anticipated modest growth. While monthly GDP figures can be volatile and subject to revision, the latest release confirms that the UK economy has failed to achieve any meaningful growth since June. This points to a prolonged period of stagnation rather than a short-term slowdown.

The figures highlight the difficult economic environment facing the UK government, particularly in the run-up to the recent Budget announced in late November. Weak growth has limited the room for manoeuvre on fiscal policy and increased pressure to stimulate economic activity without adding to inflationary risks.

The contraction was driven by sharper-than-expected falls in both the services sector and construction. Services, which account for the majority of UK economic output, declined by 0.3% in October, largely due to a poor month for retailers. Construction activity also weakened, adding to the overall slowdown.

Manufacturing output failed to rebound as anticipated following disruptions earlier in the autumn, including the impact of a cyber attack on Jaguar Land Rover. This lack of recovery further dampened overall economic performance.

The data also raises questions over the Bank of England’s current growth projections, which assume expansion of approximately 0.3% in the final quarter of the year. Financial markets have responded by significantly increasing the probability of a rate cut at the Bank’s December meeting.

On an annual basis, UK economic output was 1.1% higher in October compared with the same month last year, falling short of economist expectations. While growth remains positive on a yearly measure, the slowdown in momentum suggests ongoing challenges for policymakers, businesses, and households as they look ahead to 2026.

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