UK financial system contracts unexpectedly in new blow for Rachel Reeves

(Reuters) -Britain’s financial system shrank unexpectedly by 0.1% in October, including to indicators of a bigger-than-expected slowdown in additional dangerous information for finance minister Rachel Reeves, who described Friday’s official knowledge as “disappointing”.

Economists polled by Reuters had forecast a month-to-month growth of 0.1%.

The Workplace for Nationwide Statistics mentioned the companies sector flatlined, whereas output within the manufacturing and development industries declined in October.

“Whereas the figures this month are disappointing, we have now put in place insurance policies to ship long run financial progress,” Reeves mentioned in a press release.

Her price range assertion on Oct. 30 – whose direct affect will likely be felt in GDP knowledge for November onwards – imposed massive tax rises on companies.

An ONS statistician mentioned there was “combined” anecdotal proof for the price range affect, with some companies saying turnover had been affected by clients ready for Reeves’ announcement. Others introduced ahead exercise.

Final month, the BoE trimmed its annual progress forecast for 2024 to 1% from 1.25% however predicted a stronger 2025 with 1.5% progress, reflecting a short-term increase to the financial system from the big-spending price range plans of finance minister Rachel Reeves.

Britain’s financial output has grown slowly for the reason that COVID-19 pandemic. Solely Germany, which was additionally hit exhausting by surging power prices after Russia’s invasion of Ukraine, has executed noticeably worse among the many largest superior economies.

Earlier this month Prime Minister Keir Starmer confirmed that it was his ambition for Britain to have the quickest per capita progress in gross home product among the many Group of Seven superior economies.