UK economic growth slowed to 0.1% in the July-to-September period, falling short of the 0.2% expected by analysts, according to figures from the Office for National Statistics (ONS). The slowdown comes less than two weeks before Chancellor Rachel Reeves delivers a Budget in which tax increases are widely anticipated. Reeves has repeatedly identified growth as her top priority.
The ONS reported a “marked” fall in car production in September following the cyber-attack on Jaguar Land Rover (JLR). The incident began on 31 August and forced one of the UK’s largest car manufacturers to halt output for five weeks. Overall production output declined by 2% in September, driven primarily by a 28.6% collapse in car manufacturing. The ONS said that even excluding the JLR impact, other parts of the economy showed subdued performance.
Services and construction grew during the quarter, but both sectors expanded more slowly than in the previous three months. Consumer spending remained weak, and economists expect this to continue weighing on activity through the end of the year. The latest figure represents a slowdown from 0.3% growth between April and June and the 0.7% rise recorded in the first quarter.
The economy contracted by 0.1% in September alone, reflecting the impact of the JLR shutdown. Some analysts said the weaker-than-expected data increases the likelihood of a Bank of England interest rate cut next month. Rob Wood, chief UK economist at Pantheon Macroeconomics, said the numbers “all but seal a December rate cut” when combined with the soft labour market figures released earlier this week.
Businesses said the slow growth mirrors the cumulative effects of last year’s Budget, which raised employer National Insurance contributions and increased the national living wage. Allan Jones, managing director of TC Morris, a pie manufacturer in Dudley employing about 50 people, said operating costs had risen by £200,000 this year. He said the company passed on some of the costs to customers but absorbed the rest because of limits on what buyers are willing to pay. He said he hopes the upcoming Budget includes measures such as tax reductions, lower energy costs and government-backed grants.
Reeves said the UK had the fastest growth in the G7 during the first half of the year but acknowledged that “there’s more to do to build an economy that works for working people.” She said the Budget will include decisions aimed at reducing waiting lists, national debt and the cost of living. Shadow chancellor Mel Stride criticised the government, saying the prime minister and chancellor were “in office but not in power,” and claimed Sir Keir Starmer had limited Reeves’s influence over the Budget.
ONS director of economic statistics Liz McKeown said the quarter was defined by the sharp fall in car production due to the cyber incident and a decline in the pharmaceutical industry. She said services contributed most to overall growth, highlighting gains in business rental and leasing, live events and retail, offset by declines in research and development and hair and beauty services.
Ruth Gregory, deputy chief UK economist at Capital Economics, said the economy is “struggling to gain decent momentum” even without the drag from the JLR disruption. She said expected tax rises in the upcoming Budget could reduce GDP by around 0.2% in 2026, offering little prospect of faster growth in the near term.
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