UK economy slipped into the red in October shrinking by worse-than-expected 0.3% as Jeremy Hunt warns inflation fight is ‘inevitably’ holding down GDP – with BoE poised to keep interest rates on hold tomorrow

The British economy has slipped into the red after heavy rain added to the hit from the cost of living crisis.

Official figures showed GDP was down 0.3 per cent in October – significantly worse than the 0.1 per cent analysts had pencilled in.

UK plc effectively flatlined over the past three months, with Chancellor Jeremy Hunt warning that the struggle to control inflation is ‘inevitably’ subduing activity.

The Bank of England is set to make its latest decision on interest rates tomorrow. Although Threadneedle Street is almost certain to keep the level on hold at 5.25 per cent, the poor economic performance could add to pressure to bring forward the timing of cuts. 

The estimate for October represents a sharp turnaround from the 0.2 per cent growth the Office for National Statistics (ONS) recorded in September.

The British economy slipped into the red in October after heavy rain added to the hit from the cost of living crisis

Chancellor Jeremy Hunt warned that the struggle to control inflation is ‘inevitably’ subduing activity

All three of the main sectors fell into negative territory for the first time since July. 

ONS director of economic statistics Darren Morgan said: ‘Our initial estimates suggest that GDP growth was flat across the last three months. Increases in services, led by engineering, film production and education – which recovered from the impact of summer strikes – were offset by falls in both manufacturing and housebuilding.

‘October, however, saw contractions across all three main sectors.

‘Services were the biggest driver of the fall with drops in IT, legal firms and film production – which fell back after a couple of strong months.

‘These were also compounded by widespread falls in manufacturing and construction, which fell partly due to the poor weather.’

Mr Hunt put a positive slant on the numbers in a statement. 

‘It is inevitable GDP will be subdued whilst interest rates are doing their job to bring down inflation,’ he said. 

‘But the big reductions in business taxation announced in the Autumn Statement mean the economy is now well placed to start growing again’ 

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