UK economy slows to crawl in October with 0.1% growth

A server carries a tray of drinks from a pub in the Grassmarket in Edinburgh, as beer gardens, non-essential shops, restaurants and cafes, along with swimming pools, libraries and museums in Scotland reopen today after lockdown restrictions have eased. Picture date: Monday April 26, 2021. Andrew Milligan/PA
The restaurant sector fell back after a strong summer. Credit: PA

The UK economy slowed sharply in October, with just 0.1% growth, below the 0.4% forecast and analysts.

The fall, a slowdown from September when the economy grew by 0.6%, came as the construction sector notched up its largest drop in business since April 2020.

Second hand cars and the health sector helped prop up the economy while the hospitality sector shrank after a buoyant summer. The sector now faces further uncertainty amid Plan B restrictions brought in slow the spread of the Omicron variant.

While the services sector, which includes everything from restaurants to accountants, managed to reach its February 2020 levels again for the first time, consumer-facing services, such as restaurants, are still 5.2% below their pre-pandemic levels. Other services are 1.4% ahead.

Production output decreased by 0.6% in October 2021, with electricity and gas down by 2.9%, and mining and quarrying down by 5.0%.

A 0.6% drop in production output, due in part to the energy and mining sectors, and a 1.8% fall in construction, contributed to the slowdown.

GDP remains 0.5% below its February 2020 levels.

Chancellor Rishi Sunak said the economy was "still been recovering quicker than expected" but that there were "bumps on the road".

“While GDP growth slowed in October the UK health sector again grew strongly while second-hand car sales and employment agencies also boosted the economy,” said ONS chief economist Grant Fitzner.

“Taken as a whole, the dominant services sector reached its pre-pandemic level for the first time in 20 months.

“These gains were offset by a drop in restaurants, which fell back after a strong summer, and reduced oil extraction and gas use.

“Construction also saw its biggest drop since April last year, with notable falls in housebuilding and infrastructure work, partly driven by shortages in raw materials.”

Mr Sunak said: “We’ve always acknowledged there could be bumps on our road to recovery, but the early actions we have taken, our ongoing £400 billion economic support package and our vaccine programme mean we are well placed to keep our economy on track.

“We have still been recovering quicker than expected, with more employees on payrolls than ever before and redundancies remaining low.”

Alpesh Paleja, lead economist at the Confederation of British Industry, said: “Growth disappointed in October, reinforcing concerns about the resilience of the UK’s economic recovery to the Omicron variant and the impact of further restrictions.

“We need to create consistency in our approach and build confidence by reducing the oscillation between normal life and restrictions as we learn to live with the virus and its variants.

“Meanwhile, supply pressures remain acute and further rises in inflation are looming. We expect growth to build further momentum ahead, but more action is needed to address longer-term challenges, including ‘scarring’ from Covid and poor productivity.”