October GDP downturn reinforces expectations of Bank of England rate cut
Britain’s economy contracted again in October, with official data showing a modest drop in output ahead of Chancellor Rachel Reeves’s Autumn Budget, which itself fuelled significant uncertainty in financial markets because of rumours over tax changes.
Figures from the Office for National Statistics (ONS) showed gross domestic product (GDP) decreased by 0.1% in October, following a 0.1% drop in September. City forecasters had expected a 0.1% increase for the month.
Jonathan Moyes, head of investment research at Wealth Club, said confidence had been eroded in the run‑up to the Budget. “The government and the Chancellor spent much of their time sapping what little confidence the UK economy had left in October,” he said. “So it is not unsurprising to see the economy not only stagnate, but contract in the month before the budget.
“Confidence is a key ingredient for a thriving economy, it is a shame to see it given away so freely to mask political choices. For comparison, US GDP growth in Q3 is expected to come in at a blistering 3.8%. The UK is firmly in the global slow lane.”
On a three‑month basis, GDP edged down by 0.1% in the period to October, compared with growth of 0.1% in the three months to September 2025 and 0.2% in the three months to August 2025. The figures suggest the economy has struggled to regain momentum after disruption linked to the cyber‑attack on Jaguar Land Rover earlier in the autumn.
GDP fell 0.1% in the three months to October 2025.
— Office for National Statistics (ONS) (@ONS) December 12, 2025
Services showed no growth (0.0%), while production (-0.5%) and construction (-0.3%) both fell.
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Services output, which dominates UK economic activity, showed no growth over the latest three‑month period, after a 0.2% rise in the three months to September.
Industrial production fell by 0.5%, driven largely by lower manufacturing of motor vehicles, trailers and semi‑trailers. This mirrors a 0.5% drop in production recorded over the three months to September 2025, pointing to persistent weakness in manufacturing.
Construction also weakened, with output declining by 0.3% over the three months to October, compared with a 0.1% increase in the three months to September.
The latest data arrive as the Bank of England considers whether to cut Bank Rate at its monetary policy meeting next week. Headline inflation has eased, but policymakers face a slower growth backdrop and rising unemployment, increasing pressure to support the economy while keeping price pressures under control.
Market expectations now point towards a cut in borrowing costs – the sixth since last summer, a trajectory reinforced by the weaker GDP numbers and by measures in the chancellor’s Budget that were designed to restrain inflation alongside significant tax increases. Any change in the policy rate will feed into swap markets and funding costs, influencing mortgage pricing across fixed rate products.
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