UK GDP Contracts Amid Economic Uncertainty and Budget Speculation
In October 2025, the UK's GDP contracted by 0.1% on a month-to-month basis, with the three-month trend also declining by 0.1%. The Office for National Statistics (ONS) attributed this economic slowdown primarily to uncertainty surrounding Chancellor Rachel Reeves's upcoming budget, especially following leaks and speculation in late November.
Further weighing on economic output, Jaguar Land Rover's ongoing cyber-shutdown continued to impact production. The services sector, which is the main driver of the economy, remained flat during this period.
In response to the economic conditions, the Bank of England (BoE) is expected to reduce the Bank Rate by 25 basis points at its next meeting, bringing it below 4% for the first time since January 2023. Should economic weakness persist, an additional rate cut could follow as early as February 2026.
Both the BoE and the Office for Budget Responsibility anticipate that inflation will decline throughout 2026, which is expected to support economic recovery.
Meanwhile, the Treasury has expressed a goal to defy current forecasts by focusing on pro-growth projects such as expansions at Heathrow and Gatwick runways and the Sizewell C nuclear power station. However, it also acknowledges that there are no immediate pro-growth measures planned and anticipates upcoming tax increases.
