UK economy shrinks for second month, contracting 0.1% in October

The U.K. economy contracted unexpectedly in October, according to data from Britain's Office for National Statistics (ONS).

Gross Domestic Product fell by an estimated 0.1% on a monthly basis, the ONS said Friday, with officials attributing the downturn to a decline in production output. Economists polled by news agency Reuters had projected a 0.1% rise in GDP in October.

It marked the country's second consecutive economic downturn, following a 0.1% GDP decline in September.

Real GDP is estimated to have grown 0.1% in the three months to October, the ONS said, compared to the previous three months ending in July.

Sterling declined on the back of the disappointing print, trading 0.3% lower against the U.S. dollar at $1.2627 by 7:45 a.m. London time.

In a statement on Friday, U.K. Finance Minister Rachel Reeves conceded that the October figures were "disappointing," but defended the government's divisive economic strategies.

"We have put in place policies to deliver long term economic growth," she said, citing changes such as a cap on corporation tax and the launch of a 10-year infrastructure strategy.

In October, Reeves unveiled the government's first budget since replacing the longstanding Conservative government in July.

The budget included plans from Prime Minister Keir Starmer's government to raise taxes by £40 billion ($50.5 billion). Reeves said at the time that this would be achieved through a raft of new policies, including a hike in employer National Insurance payments — a tax on earnings — as well as a rise in capital gains tax and the scrapping of winter fuel payments to pensioners.

Some of the policies have been met with widespread criticism. The national insurance payroll tax hike, for example, has prompted warnings from businesses that they will be less likely to take on new workers, with a report from recruitment site Indeed this week suggesting the policy had already had an effect on British job openings.