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Economy contracts by 0.1% in October and "grim ripple effect of the Budget has yet to feed through"

ended 13. December 2024

Monthly real gross domestic product (GDP) is estimated to have fallen by 0.1% in October 2024, according to official data published this morning. This follows a fall of 0.1% in September 2024 and growth of 0.2% in August 2024. Monthly services output showed no growth in October 2024 after also showing no growth in September 2024, but grew by 0.1% in the three months to October 2024.

Production output fell by 0.6% in October 2024, because of falls in manufacturing, and mining and quarrying output, following a fall of 0.5% in September 2024; production output fell by 0.3% in the three months to October 2024.

Construction output fell by 0.4% in October 2024, following a growth of 0.1% in September 2024, but grew by 0.4% in the three months to October 2024. Newspage asked economists and business owners from all sectors for their views, below.

12 responses from the Newspage community

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Gabriel McKeown
Political & Economics Writer at Sad Rabbit - Substack Newsletter
The nation's economic landscape resembles a high-stakes game of Jenga, with each sector precariously balanced and businesses poised for the possibility of collapse. Following today’s GDP figures, the UK finds itself at a critical juncture as we enter 2025, with the economy teetering between recovery and regression. Throughout much of this year, the economic narrative has been one of gradual deceleration, with Chancellor Reeves's Budget doing little to boost business confidence. This upcoming period of fiscal tightening, while aimed at addressing public finances, risks stifling investment at a critical juncture. Furthermore, the labour market presents another challenge, with skills shortages persisting across multiple sectors and the government's approach to immigration and skills development remaining unclear. Additionally, inflation continues to be a concern, with persistent pressure coupled with an aforementioned tight labour market presenting a monetary policy challenge in 2025.
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Tony Redondo
Founder at Cosmos Currency Exchange
It's Bah Humbug for many businesses this Christmas. Firms around the UK are feeling the strain. Speculation ahead of the Budget led many UK based clients to pause their plans, and Rachel Reeves's Budget statement, which raised the national minimum wage and National Insurance rates, has caused many to shelve expansion plans for staffing, premises and capital equipment. Autumn, typically our busiest quarter, has seen trading volumes from UK clients decline. Conversely, trading from overseas clients, particularly those using the US Dollar, has increased but hasn't fully offset the slowdown in the UK. Looking ahead, I expect inflationary effects from the Budget to emerge in the second quarter of 2025, likely limiting the Bank of England's ability to cut interest rates much further. Meanwhile, I foresee the US economy continuing to thrive while the UK and EU face ongoing challenges.
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Matthew Knight
Chief Freelance Officer at Freelancing.Support
We surveyed around 700 UK freelancers in November to ask how 2024 was for them, and confidence is low. 30% ranked it as the worst year in their freelancing career. 86% said the increased cost of living has taken its toll on their mental health, 72% have struggled with finding work this year, and 47% are not feeling optismistic about 2025. There are some potential positives over the horizon. Increased Employer NI Contributions can mean freelancers become more financially attractive to businesses, and whilst there's still uncertainty in the market, organisations looking for experts on a short-term basis can rely upon freelancers to deliver. But as our data also showed that only 5% of freelancers felt supported by government in 2024, there's a great deal that could be done to better invest into the 2m+ freelancers in the UK, who deliver £147 billion+ to the economy.
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Rakesh Dua
CEO at DUA Accountancy & Business Consultancy
The tough times we're in have been confirmed by the data and things are unlikely to get better anytime soon. The grim ripple effect of the Budget has yet to feed through and will grip firms throughout most of 2025. The mood music in the business community is not good at all and many firms are fearful of growth actually happening. Business owners will have to work harder for growth and we expect there to be an increase in those that do not acheive it, with their profitability margins under pressure as costs continue to rise. This will inevitably lead to a number of business failures in 2025. Not the data the government wanted to see.
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Colin Low
Managing Director at Kingsfleet
It’s always worth remembering that these are early estimates and can be revised in the future. However, there’s little doubt that the incoming Government’s persistent negativity about their ‘inheritance’ has further undermined the low levels of confidence that existed at the time of the election. Economies need confidence to encourage investment, spending and growth and the Government does need to change the relationship with business and the mood music in order to alter the mentality of the nation’s decision makers.
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Mark Posniak
Managing Director, Short Term Finance at Maslow Capital
The data confirms what many are already feeling: the economy is under increasing strain. The government's recent policies, including higher taxes on businesses, have yet to take their toll. With declining production and construction output, alongside stagnation in the services sector, it's hard to ignore the signs of a broader slowdown. Unfortunately, I suspect things will get worse before they get better, as businesses and households alike adjust to these challenging conditions. It's brutal out there.
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Keith Budden
Managing Director at Ensurety
November was probably the quietest month for new business we have had since the pandemic. The only reason I can find for that is economic uncertainty ahead of and after the Budget. As a B2B service provider, business confidence is critical to us signing new business, and the Budget this autumn proved to be a double whammy. In the weeks before the Budget, no one wanted to commit to new expenditure as they weren't sure what it would hold, and then for the first few weeks post-Budget, that hiatus continued while businesses worked out just what the Employer's NIC increases and the changes to the Living Wage would mean to their business. Such was the scale of those increases that for many businesses, discretionary spend (and although it shouldn't be, for too many businesses GDPR compliance is viewed as discretionary spend) took the hit. No money to spend means no new clients for us. Fortunately December is recovering well, let's hope January continues the trend.
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Anita Wright
Chartered Financial Planner at Ribble Wealth Management
Growth in 2025 is likely to be flat or negative. The recent Budget could be described as a "work of art" for managing to be both recessionary and inflationary at the same time. Job vacancies are already declining, large retailers are signalling rising prices, and inflation is expected to tick upwards. Moreover, interest rates are unlikely to fall as much as many anticipate. Overall, the outlook for the country in 2025 is grim. For financial advisers, the final quarter of 2024 has been particularly busy. Pre-Budget, there was a noticeable increase in enquiries as clients speculated about potential changes. Post-Budget, activity has accelerated further, driven by the heightened complexity of the financial landscape and the changes affecting a significant proportion of clients. Looking ahead to 2025, advisers are expected to remain busy, especially with tax planning, which will play a pivotal role in helping clients navigate these challenges.
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Chris Barry
Director at Thomas Legal
It’s going to be a harsh winter and today’s news makes it hard to imagine when those green shoots of recovery will appear.There is a lot of talk from the latest government but very little action for imminent implementation.
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Justin Moy
Managing Director at EHF Mortgages
A technical recession now looks odds-on as the country is still reeling from the Budget that was announced after this latest set of data. Whilst property and finance might see a bubble of activity in Q1 of next year due to the changes in Stamp Duty, overall growth will be affected by the choices of this government and their desire to plug non-existent black holes. With so many financial decisions based on outlook and confidence, we don’t have much of that to be enthused about the future.
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Riz Malik
Independent Financial Adviser at R3 Wealth
This country started to go downhill when you couldn’t take the cap off a plastic bottle. The Budget made things worse and our economic output makes for grim reading. As the government is clearly on track to crash the economy, the only saving grace will be if the cost of borrowing continues to come down.
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Iain Swatton
Director at Exemplar Financial Services
The latest GDP figures highlight the fragility of the economic recovery, with business confidence taking a noticeable knock. This sentiment has been reflected in the mortgage market, where rates have fluctuated in recent weeks, first rising and then easing slightly. However, there are positive signs: house prices have seen an uplift, and demand for property remains strong. The approaching stamp duty deadline is likely contributing to the current demand, and this could provide a welcome boost to market confidence as we head into Q1 2025. That said, optimism remains cautious. Economic sentiment is still fragile, and much will depend on how businesses and consumers navigate the coming months. A balanced outlook is crucial as the market continues to adjust.