At the same time, the UK economy unexpectedly shrank by a third of a percent in October. It actually shrank—by 0.1%—according to the ONS. This downturn further extends the decline we witnessed from August to October 2022. By the end of that period, the economy had shrunk by 0.1%. After a strong start to 2025, this decline raises concerns about the sustainability of economic growth under the current Labour government, which took office in July 2024 and has prioritized economic expansion.
Today’s numbers show a glimmer of hope for the UK economy. After stagnating earlier this year, it only expanded by 0.3% in the three months to the end of June. As the third quarter, which ran from July to September, developed, that expansion cooled dramatically to only 0.1%. The International Monetary Fund (IMF) as recently as October expected the UK’s growth rate to reach 1.3% by 2025. This bold forecast indeed made the UK the second-most rapidly growing major economy that year.
The ONS employs a comprehensive approach to calculate GDP, utilizing three different measurements: Output, Expenditure, and Income. Their methodology leads them to conceive of a gross measure of GDP that counts all forms of economic activity as positive. This rigorous analysis draws on data collected from thousands of companies across various sectors, primarily focusing on output measures for early estimates. The ONS is unique among major economies for its rapidity in producing preliminary GDP estimates. It only publishes these numbers at a lag of 40 days after the end of each quarter.
Even as it’s dealing with those challenges, the IMF is projecting to be cautiously optimistic. Admittedly, they predict UK growth topping out at 1.4% in 2026 and 1.5% thereafter, but there is still hope for recovery. The ONS has been measuring well-being alongside economic growth since 2010, indicating a broader understanding of economic health beyond mere numbers.
The new Labour government is doing so under stormy seas and is clearly steering hard. It should spark long-term growth and innovation, but help compensate for the short-run economic downturn. Economic analysts are keenly observing how government policies will adapt to these developments and whether they will effectively spur growth in the coming months.