The U.K. economy unexpectedly contracted by 0.1% in October, the Office for National Statistics (ONS) reported, following a decline in production output. Economists had expected a 0.1% rise in Gross Domestic Product (GDP) for the month. This marks the second consecutive month of economic downturn after a 0.1% drop in September.

Despite this, real GDP grew by 0.1% in the three months leading up to October, compared to the previous quarter. Following the disappointing data, the pound fell by 0.3% against the U.S. dollar, trading at $1.2627.

In response, Finance Minister Rachel Reeves acknowledged the disappointing figures but defended the government’s economic policies, including a long-term growth strategy involving a cap on corporation tax and a 10-year infrastructure plan. The government’s first budget, introduced in late October, included tax hikes amounting to £40 billion ($50.5 billion), including increased National Insurance payments and higher capital gains tax.

However, some of the proposed measures have faced criticism, particularly the National Insurance increase, which businesses warn could limit job creation. A report from recruitment site Indeed indicated that the payroll tax hike has already impacted job openings.