Britain’s economic woes are back in the spotlight as the UK economy shrinks for the second month in a row, according to the latest bombshell data from the Office for National Statistics (ONS). October saw a 0.1 percent drop in GDP, following a similar dip in September,completely blindsiding analysts who had confidently predicted a return to growth. So much for expert forecasts.

This double dose of bad news couldn’t come at a worse time for Prime Minister Keir Starmer and his Labour government, who have been loudly touting their ability to “fix” the economy and tackle the cost-of-living crisis. Their much-hyped budget, packed with tax hikes to supposedly reduce state debt and fund public services, has sparked fierce debate and left many wondering if the government really has a grip on the situation.

While the manufacturing sector managed a minor comeback,thanks mainly to Jaguar Land Rover bouncing back after a cyberattack,most of the economy is still stuck in the doldrums. Consumer and business spending have both taken a hit, with households and companies clearly spooked by the government’s new fiscal measures and the endless swirl of budget leaks and speculation. The result? A clear drop in confidence and activity across the board.

“Business and consumers were braced for tax hikes and the endless speculation and leaks have once again put a brake on the UK economy,” said Lindsay James, investment manager at Quilter. Retail, hospitality, and the all-important services sector are all feeling the pinch, with spending and growth nowhere to be seen.

The government’s tax-heavy approach is now under fire, with critics warning that higher taxes on businesses and workers are killing investment and jobs. Finance minister Rachel Reeves’ first budget saw corporate taxes go up,a move many are blaming for the sluggish growth and rising unemployment. And with more tax increases hitting workers, the debate over whether the government is helping or hurting the economy is only getting louder.

To make matters worse, official forecasts released alongside the budget have slashed the UK’s growth outlook for years to come. The message is clear: the government’s current strategy isn’t working, and pressure is mounting for a dramatic rethink to avoid further economic pain.

All eyes are now on the Bank of England, with many expecting an emergency interest rate cut to try and stop the bleeding. While this could offer some short-term relief, it’s also a stark sign of just how serious the situation has become.

With the UK economy shrinking and confidence evaporating, the government’s promises of renewed growth and prosperity are looking increasingly hollow. The next few months will be a make-or-break test for Starmer’s leadership,and for Britain’s economic future.