FTSE 100 Live: Blow for Reeves as economy shrank ahead of Budget
Good morning and welcome back to the City PM liveblog.
Today fresh economic data has given another crucial assessment of the Chancellor’s growth agenda.
The UK economy shrank 0.1 per cent in October as businesses paused investments amid consistent rumours around upcoming tax hikes in Rachel Reeves’ second Autumn Budget.
A Bloomberg poll of City economists had predicted the Office for National Statistics (ONS) will pencil in next to no growth for October.
The contraction deals a major blow to Rachel Reeves’ ambition to deliver higher growth, with analysts laying the blame on her policies and chaotic communication from the Treasury in the run-up to last month’s fiscal event.
The poor result also follows a decline of 0.1 per cent in September, with the UK economy worsening in part due to the cyber attack on Jaguar Land Rover.
“Economic policy uncertainty spiked in late October when the Prime Minister refused to guarantee no change to income-tax rates, and again in early November when Chancellor Rachel Reeves reportedly ditched a plan to hike income taxes,” Pantheon’s Rob Wood and Elliott Jordan-Doak said.
“The Budget itself, as distinct from the chaotic speculation, does little to our growth forecasts.”
The fiscal watchdog UK already dealt a major blow to the government after downgrading growth forecasts every year from 2026 til 2030.
It came after the Office for Budget Responsibility (OBR) found the measures proposed in the Budget would do little to drive growth with the “smorgasbord” of tax hikes risking putting economic forecasts on shakier ground.
Reeves has promised to “beat” the forecasts but with October data looking glum will she be able to ramp up her mission for growth?
We’ll be bringing you the top news of the morning as we get it.
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- Auditor MHA queried source of funds in Sanjeev Gupta-owned firms before resigning
- Viagogo scams F1 fans out of post-race gigs
- Will the land of the free take a dim view of my social media posts?