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Britain’s economy unexpectedly shrank in October before Rachel Reeves’s budget, official figures show, as activity failed to regain momentum after the cyber-attack on Jaguar Land Rover.

Figures from the Office for National Satistics (ONS) showed gross domestic product fell by 0.1%, after a 0.1% drop in output in September. City economists had predicted a 0.1% rise in October.

It comes as the Bank of England mulls cutting interest rates next week amid a slowdown in headline inflation and fears over a sluggish growth outlook and rise in unemployment.

The latest snapshot will probably cement City predictions for a sixth reduction in borrowing costs since the summer of last year, after the chancellor’s budget included a number of inflation-cutting measures alongside sweeping tax rises.

Threadneedle Street has said Reeves’s policies – including relief on energy bills, prescription charges and fuel duty – could cut headline inflation by as much as half a percentage point next year.

Economic output fell in September after hackers breaching JLR’s systems resulted in the country’s second-largest carmaker halting its UK production lines for several weeks.

In an incident estimated to have cost the economy at large up to £1.9bn, the halt crippled hundreds of smaller companies in the manufacturer’s supply chain, causing monthly output in the car industry to collapse by a third.

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The government will consider new laws to correct the power imbalance in franchise agreements in response to the “harrowing stories” of small business people running Vodafone stores.

The move follows allegations of suicide and attempted suicide among shopkeepers who had agreed to deals to run retail outlets for the £18bn telecoms company, which were revealed by the Guardian on Monday.

During Thursday’s business questions in the Commons, Justin Madders, a former minister, said: “I’m sure the department will have been aware of the coverage this week of some of the harrowing stories of the treatment of Vodafone franchisees … [The department] will no doubt recognise the power imbalance in that relationship and will they consider looking at some measures to redress that imbalance perhaps by a statutory code of practice or a national arbitration system?”

Chris Bryant, a minister of state at the Department for Business and Trade, said: “I am happy to sit down with him and discuss whether there are specific proposals that we could bring forward which would address that issue of imbalance.”

Outside the chamber another former business minister, Labour’s Gareth Thomas, added: “This case continues to raise disturbing echoes of the Post Office scandal and raises the question as to whether the law around franchising needs to be toughened up to ensure small-business owners are better protected.”

On Monday, the Guardian revealed allegations that Adrian Howe, a former Vodafone employee who had agreed to become a franchisee in 2018, had taken his own life after becoming convinced his deal with the multinational company would prove financially disastrous.

Rachael Beddow-Davison and Dan Attwal also told the Guardian about how commission cuts by Vodafone in 2020 caused their franchising companies to run up huge debts, which they each said contributed to them attempting to kill themselves.

A group of 62 former Vodafone franchisees brought a high court claim in 2024, alleging the telecoms company “unjustly enriched” itself by slashing sales commissions paid to the small business owners for running the stores in 2020.

In September, Vodafone commenced offering financial settlements to a selection of former franchisees who are outside the group of claimants currently suing the business – as it launched its fourth investigation into the historical conduct within its franchising division.

Vodafone says the ongoing legal claim is a “commercial dispute” but has previously apologised to claimants who blamed pressure from the telecoms group for triggering suicidal thoughts. A survey of franchisees during September 2020 resulted in 78 out of 119 respondents leaving overwhelmingly critical comments about the effects Vodafone’s actions had had on their mental health.

In response to the Guardian’s investigation, a Vodafone UK spokesperson said: “While we are sorry if any partners have had a difficult experience, we reject any suggestion that our franchisees were put under undue pressure.

“We continue to run a successful franchise operation, and many of our existing franchisees have expanded their business with us by taking on additional stores. We encourage everyone to raise issues, and we will always seek to resolve them, and we remain open to further discussions with claimants to resolve the commercial dispute.”

The company said it “wholly rejects” any suggestion that it “knowingly or recklessly or negligently” put anybody involved with its franchise stores under unreasonable pressure.