A monthly contraction in GDP of 0.1% in October, and a similar fall in the three-month trend, was attributed to uncertainty about Rachel Reeves’s plans amid an autumn blizzard of trails, leaks and speculation.
The ONS said businesses across the “production, construction and services” reported waiting for the outcome of the budget.
It was not the only factor – output was pulled down by the continued impact of the Jaguar Land Rover cyber-shutdown and services, the engine of the economy, were flat – but we can now put a price on the chancellor’s prevarication.
It is likely to have taken a toll on November’s figures, too, making it likely that the year will end with a quarter of stalled growth, and raising questions about where a rebound may come from.
The slowdown should remove any lingering doubts that the Bank of England will agree an interest rate cut when it meets next week, the expected quarter-point trim taking the headline figure below 4% for the first time since January 2023.
The pace of cuts beyond that remains uncertain, but if the torpid performance continues, then another cut could come as early as February.
The Bank and the Office for Budget Responsibility both expect inflation to decline in 2026, too, which could help the economy climb out of the current slough.
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In a statement, the Treasury said the government was determined to defy forecasts, and cited a number of projects as examples of its pro-growth credentials, including new runways at Heathrow and Gatwick and the Sizewell C nuclear power station.
What they all have in common are completion dates in the next decade, and with the budget scored as having no immediate pro-growth measures, and tax rises to come, it is not clear where the economic jump-start will come from.
