Higher interest rates and bad weather blamed for shrinking economy

The UK’s economy shrank by more than expected in October, with higher interest rates and bad weather restricting growth, according to the latest figures published today.

Gross domestic product (GDP) dropped by 0.3% on the month, compared with a growth of 0.2% in September.

Household spending has been hit by rate rises as the Bank of England tries to bring down inflation. It will be making its next rate decision on Thursday.

Meanwhile, both the construction and tourism sectors suffered from wet weather last month as Storm Babet lashed the UK.

Most economists had forecast that the economy would decline by only 0.1% in October. Darren Morgan, of The Office for National Statistics, said: “Services were the biggest driver of the fall with drops in IT, legal firms and film production – which fell back after a couple of strong months.

“These were also compounded by widespread falls in manufacturing and construction, which fell partly due to the poor weather, such as the severe winds and flooding seen during Storm Babet.”

Mike Randall, CEO of Simply Asset Finance says, “After the economy failed to grow in Q3, businesses will be prepared and won’t let this hamper their plans as we move towards the end of the year.

“But with additional challenges such as high interest rates still impacting SME growth, now is the time for businesses to assess their funding options and see how they can implement the strategies they have been working on over the past year, such as tackling productivity. In doing so, business leaders will be in a better position to think beyond immediate issues and construct long-term goals. For example, through our own research we know that Net-Zero is a priority for businesses moving forward yet it’s continually pushed down their agendas as immediate needs take over.

“SMEs are the heartbeat of the UK economy, accounting for 99% of all businesses in the UK. It’s important their long-term growth plans are allowed to be a priority if we’re going to see the UK economy drive forward.”