Or that in October, the UK economy shrank by a greater-than-expected 0.1%. The change represents a huge 0.6% increase from the economists’ forecasts of 0.1% growth. This contraction – reported by the Office for National Statistics (ONS) alongside a forewarned fall in GDP – highlights a deeply worrying trend that has taken hold in recent months. In the three months to October, production output fell by 0.5%. This continued drop points to the struggles still felt by the manufacturing industry.
One of the biggest drivers of this recent dip was the steep drop in the production of vehicles. It fell — and I mean fell — by a record-shattering 17.7% during that three-month stretch. This drop occurred in the context of an overall economic standstill, with the services sector growing by zero—yes, zero—during these months. That leaves further evidence pointing to a scary trend, with the economy narrowly avoiding contraction in six out of the last seven months.
Sir Mel Stride, the Conservative Party Treasury spokesperson, referenced the recent Budget as a catalyst for this economic downturn. He argued that, if anything, it deepened the constraints on the economy. He added, “For months Rachel Reeves has pulled the wool over the British public’s eyes. She said she would never raise taxes on working people – today she’s done it for the second time.” Stride stressed the importance of taking strong, bold action to meet our nation’s economic challenges.
Closure of carmaker Jaguar Land Rover was the biggest factor in the contraction. A quick rebound after its temporary closure didn’t materialize. Jack Meaning, the UK chief economist at Barclays Bank, touched on this during his recent testimony. He added, “Ultimately, part of the story today is that we didn’t get to see as big of a bounce-back from the Jaguar Land Rover shutdown as we would have liked.” We assumed all of that would come back very quickly, but as it turns out, even that’s going to take a bit longer.
In October, vehicle manufacturing seemed to have a momentary ray of sunshine. It was largely responsible for a small increase in manufacturing, lifting the overall production picture 1.1%. This increase was not enough to make up for the greater decline that they have experienced in recent months. Liz McKeown, the ONS director of economic statistics, drew attention to underlying problems in car manufacturing. She further observed that although the unexpected increase in October could be viewed as a positive sign, it came on the heels of a precipitous falloff in production from September.
Ruth Gregory is a UK economist, deputy chief UK economist at Capital Economics. She said the red ink bolsters the case for the Bank of England to move again and start cutting rates. She noted how misleading that is as the economy has contracted in six of the last seven months. Amazingly, this observation cheers despite worries about its long term health.
It was this uncertainty about the new Budget that was a major factor influencing consumers. Many individuals appeared hesitant to make purchases or engage in significant spending decisions due to apprehension about future economic conditions. This hesitance to act on the part of consumers added to the crawl we saw in many sectors of the economy.
As policymakers grapple with these economic challenges, there is pressure to implement measures that may stimulate growth and restore consumer confidence. This government is deeply committed to tackling these inequalities and discrimination. In a statement to the press, a Treasury spokesman cited their desire to “go beyond growth expectations.” They want to ensure these corporations produce quality jobs that lift everyone up and help foster investments that lead to better public services.