Britain’s economy unexpectedly contracted for a second consecutive month in October, according to official data released on Friday, a development that deals a blow to the Labour government’s ambitions of reviving economic growth.

Gross domestic product recorded a 0.1 per cent fall in October, following a matching contraction of 0.1 per cent recorded in the preceding month of September, as stated by the Office for National Statistics in an official statement.

This outcome significantly missed the financial market predictions, as analysts had broadly forecasted growth of 0.1 per cent for the month.

The manufacturing sector showed a rebound in October, primarily because carmaker Jaguar Land Rover resumed its full operations after a cyberattack had negatively impacted the UK economy in September.

However, analysts pointed out that both businesses and consumers curtailed their spending in anticipation of Britain’s highly expected annual budget announcement.

Lindsay James, an investment manager at Quilter, commented on the effect of the budget anticipation on economic activity. “Business and consumers were braced for tax hikes and the endless speculation and leaks have once again put a brake on the UK economy,” she said.

Prime Minister Keir Starmer’s Labour Party subsequently raised taxes in the budget delivered last month, intending to reduce the national state debt and secure funding for public services.

Simultaneously, the economic growth forecast for Britain was officially downgraded, covering the period from next year until the end of 2029, according to data that was released alongside the annual budget.

Finance minister Rachel Reeves had previously increased taxes on businesses in her inaugural budget delivered last year, a decision that has been widely blamed for contributing to weak UK economic growth and a rise in unemployment.

She returned in November with a fresh round of tax hikes, with the burden of these new increases specifically targeting workers.

Analysts concluded that the data released on Friday strengthens the market expectations that the Bank of England will proceed with a decision to cut interest rates during the following week.