Activity across the UK’s private sector slipped to an 11-month low in October, amid growing business uncertainty ahead of the Autumn Budget.
The S&P Global flash UK composite purchasing managers’ index (PMI) reported a reading of 51.7 in October, down from 52.6 in September.
It came in lower than expectations of economists, who had pencilled in a reading of 52.6 for the latest survey.
The flash figures are based on preliminary data. Any score below 50 indicates that activity is contracting, while any score above means it is growing.
Chris Williamson, chief business economist at S&P Global Market Intelligence, said: “Business activity growth has slumped to its lowest for nearly a year in October as gloomy Government rhetoric and uncertainty ahead of the Budget has dampened business confidence and spending.
“Companies await clarity on Government policy, with conflicts in the Middle East and Ukraine, as well as the US elections, adding to the nervousness about the economic outlook.”
Chancellor Rachel Reeves has struck a pessimistic tone around the Budget in recent months, warning of “tough decisions”, which in turn has hit confidence in some parts of the economy.
In recent weeks, that has even extended to the employment market, the survey indicated, with overall staffing numbers decreasing for the first time in 2024 to date.
Mr Williamson continued: “Worryingly, the deterioration in business confidence in the outlook has also prompted companies to reduce headcounts for the first time this year.
“Clearly, the policies announced in the Budget have the potential to play a major role in steering the direction of the economy in the months ahead.”
Nikesh Sawjani, senior UK Economist at Lloyds, said: “October’s decline suggests that momentum may have eased compared to the first half of 2024.
“Despite the fall, firms’ output expectations remain above the long-term average as businesses remain cautiously optimistic.
“With inflationary pressures easing, businesses will want to keep an eye on interest rates to maximise economic conditions before year end.”
Meanwhile, there was encouraging news for inflation watchers, as the rate of price increases eased to its lowest for four years, driven partly by falling fuel costs.
It comes as a positive sign for Bank of England policymakers, who meet in November to decide whether to cut interest rates again.
Mr Williamson added the drop in input price inflation “opens the door for the Bank of England to take a more aggressive stance towards lowering interest rates, should the current slowdown become more entrenched”.