Chancellor Rachel Reeves has come under further pressure as pre-Budget worries and tax hike speculation was widely blamed for an unexpected contraction in the economy during October.

Official figures showed the UK economy shrank for the second month running in October, contracting by 0.1% following a 0.1% decline in September.

Most economists had been expecting a rise of 0.1% for October on hopes of a manufacturing bounceback led by Jaguar Land Rover’s (JLR) recovery from a major cyber attack.

The Office for National Statistics (ONS) said gross domestic product (GDP) fell as car manufacturing activity only made a “slight” recovery from the woes at JLR, with the services sector weighed down as consumers held back spending on the high street before the Budget, delivered on November 26.

The data shows the UK economy has now not grown since June, with GDP either flat or falling in the past four months.

Economists said the weaker-than-expected figures would reinforce hopes of an interest rate cut by the Bank of England next week in what would be a welcome pre-Christmas boost to households.

In the three months to October, the economy shrank by 0.1% after growth of 0.1% in the three months to September, according to the ONS.

Many businesses have recently indicated that activity in the economy slowed in the lead-up to the Budget as speculation over possible tax measures grew.

Barret Kupelian, chief economist at PwC, said: “Some of this weakness still reflects the cyberattack on Jaguar Land Rover, which knocked car output earlier in the autumn, but the bigger story is that speculation around the autumn Budget kept households and businesses in wait-and-see mode.

“Given the timing of the Budget, November’s GDP print is likely to look similarly subdued before any post-Budget effects start to show up.”

Some experts have said weak recent growth was largely driven by rampant speculation in the run up to the Budget.

Former Bank of England chief economist Andy Haldane said last month the prolonged worries over the Budget and leaks over possible tax hikes had “caused businesses and consumers to hunker down”.

Earlier this week, Ms Reeves hit out at “too many leaks” in the run-up to Budget when questioned by a committee of MPs.

Shadow chancellor Sir Mel Stride said the latest GDP blow was “a direct result of Labour’s economic mismanagement”.

He said: “For months, Rachel Reeves has misled the British public. She said she wouldn’t raise taxes on working people – she broke that promise again. She insisted there was a black hole in the public finances – but there wasn’t.”

The ONS data The data revealed that month-on-month activity in car production jumped 9.5% higher in October, but this was only a partial recovery from the 28.6% plunge in September as the JLR cyberattack sent shockwaves through the sector.

Car production activity remained 21.8% lower than in August.

JLR was forced to pause production of its cars for more than a month after being targeted by hackers, having a knock-on impact for the wider sector and resulting in a costly recovery.

It gradually resumed production through October.

Widespread pressure in the rest of the economy also weighed on the GDP outturn, with output down 0.3% across the dominant services sector – including a 1.1% drop for retail – and a 0.6% fall across construction.

A Treasury spokesperson said: “We are determined to defy the forecasts on growth and create good jobs, so everyone is better off, while also helping us invest in better public services.”

Rob Wood, chief UK economist at Pantheon Macroeconomics, said the recent “Budget chaos” through November is likely to hit growth through that month too, which could see GDP contract by 0.1% in the final quarter of 2026.

He said: “Weak GDP adds to the reasons for the Monetary Policy Committee to cut interest rates next week.

“Rate setters would need a huge surprise in inflation and the labour market data published next week to stop a hike.”

Last Updated:December 12, 2025, 15:10 IST

The BSE Sensex jumps 335.08 points to trade at 85,151.32 in the early trade, while the NSE Nifty rises by 110.05 points to above 26,000 at 26,009.60.

Market Today: Continuing strong momentum for the second day, the domestic equity market on Friday saw a positive opening amid global stability following the recent US Fed rate cut and easing crude oil prices. The BSE Sensex jumped 475.8 points to trade at 85,290.21 in the early trade, while the NSE Nifty surged by 152.63 points to above 26,000 at 26,051.32.

Among the 30 Sensex shares, 23 were trading in green. Among the top gainers were Tata Steel, Eternal, Ultratech Cement, Larsen & Toubro, and Bharti Airtel, rising by up to 3.37%. On the other hand, the laggards were HUL, Sun Pharma, ITC, Asian Paints, Power Grid, Kotak Mahindra Bank, and SBI, falling by up to 1.77%.

In the broader market, the BSE Midcap and the BSE Smallcap were trading higher by 1.21% and 0.67%, respectively.

“Sentiment remains supported by global stability following the recent US Fed rate cut and easing crude oil prices, although foreign fund outflows and rupee weakness keep traders somewhat cautious. The broader setup suggests a continuation of range-bound movement unless a clear breakout emerges,” said Aakash Shah, Technical Research Analyst at Choice Equity Broking.

Immediate support now lies around 25,750-25,800, and deeper support is positioned near 25,500. On the upside, resistance is expected around 26,000-26,050. Sustained trade above 26,050 may encourage further buying, potentially driving the index toward 26,300. Until then, intraday swings may remain contained, he added.

Global Markets

Asian stocks advanced in early trade on Friday following strength on Wall Street overnight, though a fresh decline in Oracle’s share price sent jitters through the tech sector. Financial markets had to move fast to find their footing this week when the Federal Reserve cut interest rates but gave a less hawkish outlook than expected, and the return of AI bubble worries ‌added ‌to the stress for investors.

MSCI’s broadest index of Asia-Pacific shares outside Japan was up 0.7%, tracking mostly higher US markets on Thursday, the Dow and Russell 2000 indices hit new highs but the Nasdaq fell. Tokyo’s Nikkei 225 ‍outperformed the region in morning trade, climbing 1% as shares in Softbank Group surged 6% after Bloomberg News reported it is considering acquiring the US data centre company Switch Inc.

S&P 500 e-mini futures were unchanged and Nasdaq future were down 0.2% as markets were on edge after Oracle shares plunged 13%, sparking a tech selloff, as the company’s massive spending and weak forecasts fanned doubts over how quickly the big bets on AI will pay off.

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Russia’s oil exports crashed to their lowest point since the Ukraine war began, weighed down by buyers moving away from Moscow amid tightened US sanctions and Kyiv’s escalating attacks. In its latest assessment, the International Energy Agency (IEA) noted that Russian oil exports declined by 420 kb/d in November, pulling total shipments down to 6.9 mb/d.The drop in volumes and weakening prices pushed Moscow’s oil revenue down to $11 billion, which is $3.6 billion less than the same month last year. The IEA added that both export volumes and prices have dropped, “dragging export revenues to their lowest since Russia’s invasion of Ukraine in February 2022.”

Urals crude prices plunge

As exports dragged down, Urals crude prices also tumbled by $8.2/bbl to $43.52/bbl (one barrel is about 159 litres). This marked the lowest level since the start of the Ukraine conflict in February 2022.According to the IEA, this downturn pushed export revenues to their lowest monthly level since the invasion began.

Impact of Ukrainian strikes and Russia’s “shadow fleet”

The IEA said Ukrainian attacks on Russia’s sanctions-busting “shadow fleet” and marine oil facilities cut almost half of Russia’s November seaborne exports through the Black Sea.The pressure on shipments and prices comes as Russia struggles with meagre economic growth, the accumulated impact of sanctions and Ukrainian strikes on its energy infrastructure.Ukraine intensified strikes on Russian refineries over the summer and early autumn, causing domestic petrol prices to spike and prompting some Russian regions to introduce fuel rationing.“After weathering significant unplanned refinery outages in November, tightness in refined product markets has eased, but sanctions in 1Q26 will provide fresh challenges,” the IEA said.

Russia’s budget under strain

The Russian finance ministry reported that oil and gas revenues for the first nine months of the year were down 22% to $88 billion.A combination of high military spending, entrenched inflation and falling oil income has stretched Moscow’s budget. Russia is expected to post a $50 billion deficit this year, around three percent of GDP, and plans to raise taxes on consumers and businesses next year to narrow the gap.

US escalates pressure with tariffs and sanctions

The United States has warned several countries that they may face additional tariffs and punitive trade measures if they continue buying Russian oil. The EU has Washington recently imposed an additional 25% tariff on imports from India, citing its continued purchases of Russian crude. This was on top of the 25% tariff previously announced by US President Trump.In October, the US unveiled some of its toughest measures yet on Russia’s energy sector by sanctioning Rosneft and Lukoil, the country’s two biggest oil producers, in an effort to pressure Moscow to end the nearly four-year war in Ukraine.

Global supply slips

Global oil supply fell by 610 kb/d in November, extending cumulative declines from September’s record high of 109 mb/d to 1.5 mb/d, the IEA said.OPEC+ accounted for more than three-quarters of the overall drop, driven mainly by sanctions-hit Russia and Venezuela. The group contributed 80% of the supply decline over the past two months, reflecting major unplanned outages in Kuwait and Kazakhstan, alongside continued contractions in Russia and Venezuela.Among non-OPEC+ producers, the United States, Brazil and biofuels were also contributors to the global supply decline.

Outlook — What will happen in the oil sector?

Despite recent market tightness, the IEA projects global oil supply to grow by 3 mb/d in 2025 and a further 2.4 mb/d in 2026. However, the agency revised its supply growth forecasts downward, by 100 kb/d for 2025 and 20 kb/d for 2026 — to 106.2 mb/d and 108.6 mb/d respectively.On the demand front, world oil consumption is expected to rise by 830 kb/d in 2025, supported by improved macroeconomic and trade conditions. The IEA has also upgraded its 2026 demand outlook to 860 kb/d, an increase of 90 kb/d from earlier estimates.Gasoil and jet/kerosene are projected to account for half of this year’s demand growth, while fuel oil continues to lose ground due to substitution by natural gas and solar in power generation.