Economists surprised as UK economy shrinks for second month, amid business 'pessimism' over government's budget decisions. - Ray Addison, Correspondent
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00:00The British economy has shrunk for the second month in a row. It's another headache for the
00:05government, which took office in July, pledging to fire up economic growth. But GDP dropped 0.1%
00:11in October, a month that saw widespread speculation and concern among businesses
00:16over what might be included in the government's first budget. Manufacturing recorded the sharpest
00:22drop, down 0.6%, while construction fell by 0.4%. Meanwhile, the UK's dominant services sector saw
00:29zero growth. And it seems that consumers are continuing to feel the pinch of relatively high
00:35interest rates, despite two cuts this year. Pubs, restaurants and retailers were among those
00:40reporting a weak month. Food and beverage service activity was down 0.27%. Well, let's talk now to
00:48our correspondent, Ray Addison, who's out doing his Christmas shopping in the West End in central
00:53London. Good to see you, Ray. So, a tough road ahead for the British government as we head into
00:57the Christmas season. Well, yes, it's certainly not the result that the new UK Prime Minister and
01:05Chancellor would have wanted. In fact, it surprised many economists. Many had predicted that there
01:11would be a small increase of 0.1% in GDP in October. And so these figures have been certainly
01:19a surprise to economists. It's the first back-to-back decline since March and April of
01:252020. And of course, if you remember back then, it was the onset of the COVID-19 pandemic. Britain was
01:32enforcing its first lockdown as well. But perhaps it's too early to lay any kind of responsibility
01:39at the feet of the new UK government here. But it is fair to say that there was nervousness
01:45approaching that autumn budget among businesses. Then there was a mixed reaction to the announcements,
01:54those decisions to raise taxes. Remember, business national insurance contributions were
02:01increased. There was increases to capital gains tax, as well as increases to the national living
02:07and minimum wages as well. It led some companies to say that they were going to slow their spending
02:15and also hold back on any kind of new hiring. And in fact, I was talking to one business owner here
02:21on Regent Street, and he was saying that he's been forced to do exactly that. He's described
02:27the current UK business environment as pessimistic and unsettled. And he said, particularly the
02:33national insurance changes had unsettled many of the clients that he deals with in his marketing
02:41firm. Now, the government, of course, has said that it was forced to make these decisions due to the
02:47$27 billion black hole that they found when they took over from the Conservative government.
02:55Of course, UK Chancellor Rachel Reeves has said that today's GDP data is disappointing.
03:02But she said, we have put in place policies to deliver long term economic growth. But,
03:08of course, if companies are halting their levels of investment, it's fair to wonder
03:14where that kind of growth will be coming from. Of course, today's news adds to the
03:21worse than expected figures that we've seen in other areas of Britain's economy as well.
03:26There's separate ONS data which shows that UK imports and exports fell in October. Meanwhile,
03:34the consumer price index has risen to 2.3% as well. That's the highest rate of inflation
03:41for six months. So we'll have to wait to see how that affects
03:44the Bank of England's decision on interest rates, which is less than a week away.