The UK economy contracted by 0.1% in October, according to official figures.
The surprise fall in gross domestic product (GDP) – a measure of economic output – comes after a similar unexpected 0.1% drop in September and 0% growth in August.
Economists polled by the Reuters news agency had predicted that October GDP would grow by 0.1%.
The figures, from the Office for National Statistics (ONS), represent more bad news for the chancellor over the state of the UK economy.
Commentators had warned that consumer spending was likely to be restrained in the run-up to November’s budget, amid concerns about the impact of Rachel Reeves’s potential measures on households and businesses.
UK GDP has also been hit hard by disruption to car production caused by a cyber attack on Jaguar Land Rover.
The ONS said that during October, the UK’s services sector fell by 0.3%, while construction was down 0.6%. However, production grew by 1.1%.
It found that GDP on a rolling three-month basis, to October, also fell by 0.1%.
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The ONS’s director of economic statistics, Liz McKeown, said: “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. There were falls in wholesale and scientific research, offset by growth in rental and leasing and retail.”
Interest rate cut ‘nailed on’
Commentators also blamed rumours and leaks in the run-up to the budget for dampening demand.
Scott Gardner, from banking giant JP Morgan, said that despite expectations of a return to growth, the economy continued to “battle a period of inconsistent productivity”.
He added: “Speculation about potential budget announcements had a numbing effect on consumers and businesses in the lead up to the chancellor’s speech at the end of November.”
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Suren Thiru, from the Institute of Chartered Accountants, said the data increased the likelihood of the Bank of England cutting interest rates next week.
He said: “With these downbeat figures likely to further fuel fears among rate-setters over the health of the UK economy, a December policy loosening looks nailed on, particularly given the likely deflationary impact of the budget.”
Figures ‘extremely concerning’
Barret Kupelian, chief economist at PwC, said that while some of the blame could be attributed to the Jaguar Land Rover cyber attack, “the bigger story is that speculation around the autumn budget kept households and businesses in wait-and-see mode”.
He added: “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.”
Sir Mel Stride, the Tory shadow chancellor, described the figures as “extremely concerning”, claiming they were “a direct result of Labour’s economic mismanagement”.
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.”
