The UK’s economy contracted at its fastest rate in nearly two years, indicating that the country has
entered a recession during a time of high energy and borrowing costs as well as political uncertainty. A
measure of private sector activity, the S&P Global/Cips flash UK composite output index, fell to a 21-
month low of 47.1 in October from 49.1 in September.
This is the third reading below 50 in a row, below the 48.1 predicted by Reuters-surveyed economists
and indicating that the majority of businesses are reporting a decline in activity. The gloomy outlook
comes at a time when the UK is experiencing political unrest. Following Liz Truss’s ouster last week,
candidates are fighting for the leadership of the Conservative party.
After the recent upheavals in the political and financial markets, S&P Global Market Intelligence’s chief
business economist, Chris Williamson, stated that the flash PMI data for October showed “the pace of
economic decline gathering momentum.”
He made the observation that the UK’s economy “looks certain to fall in the fourth quarter after a likely
third quarter contraction, meaning the country is in recession.” New orders decreased at the fastest rate
since January 2021, indicating a decline in consumer and business confidence. In addition, UK private
sector businesses indicated a decline in business expectations for the upcoming year as a result of
inflationary pressures, political uncertainty, and rising interest rates.
The services sector reported its first contraction in 20 months, while the manufacturing sector reported
its third month of decline.
According to the report, factors that contributed to lower output in October included concerns about
the recession, squeezed household budgets, and delayed decisions regarding business investments as a
result of political uncertainty.