UK growth slowed to 0.1% as car production dragged the economy ahead of the budget
UK economic growth slowed sharply in the third quarter, rising by 0.1% between July and September, as a fall in car output and consumer spending is seen ahead of the Chancellor’s budget later this month.
The figure, published by the Office for National Statistics, came in below analysts’ estimates of less than 0.2% and marked a clear drop from the 0.3% growth recorded during the year.
The suspects say that the decline is driven by a “marked” fall in car production, after a cyber attack on Jaguar Land Rover forced the largest carmaker to stop production for five weeks. The strike, which began on August 31, led to a 28.6% drop in vehicle output in September and forced total production down 2%.
Even without disruptions in the auto sector, the broader economy showed signs of spillover. Growth in services and construction slowed last quarter, consumer spending remains as households continue to face higher living costs and uncertainty ahead of the 26 November budget.
Economists have warned the figures expected more than the chachellor Rachel Reeves, who also puts economic growth at the center of his agenda but is expected to announce the arrival of the tax to link the arrival of the tax to link the arrival of the tax to link the arrival of the tax to link the arrival of the tax to link the arrival of the tax to link the arrival of the tax to link the arrival of the tax to link the arrival of the tax to link tax arrival to link tax arrival to link tax arrival to link tax arrival to link tax arrival to link tax arrival to link tax arrival to link tax arrival to link tax arrival to link tax arrival to link tax arrival to link tax arrival to link tax arrival to link tax deficiency.
Some analysts now believe that weak GDP data increases the likelihood of an interest rate cut by the Bank of England in early December. Wood Wood, chief economist at Pantheon Macromonomics, said the numbers “all but tie in with December’s benchmark rate”, especially when combined with disappointing labor market figures published earlier this week.
For many businesses, the decline reflects the impact of last year’s budget reversal, which raised statewide insurance contributions and increased statewide wages.
Allan Jones, Managing Director of TC Morris, a pie maker in Dudley which employs around 50 people, said his operating costs had risen by £200,000 this year.
“I think there’s a level where people are willing to pay for pork,” he said. “We were able to pass some increases, but we have to cut back a bit. We need to see some bite in the budget – Lower costs, lower energy costs, and more funding for investment.”
In response to the data, Reeves said the UK had the fastest growing economy in the G7 in the first half of the year, but admitted that “more needs to be done to build an economy that works for working people”. He said his next budget would take “the right decisions” to cut waiting lists, reduce the national debt and lower the cost of living.
Shadow Chancellor Mel Stride accused the government of losing authority, arguing that Sir Keir Starmer had breached the chancellor’s mandate.
Liz McKeown, director of economics, highlighted “a particularly marked fall” in car exposure due to the cyber incident and the decline of the volatile pharmaceutical sector.
“Services had a significant impact on growth,” he said, “through business hiring and leasing, live events and well-executed sales, partly through R&D and excellence.”
Ruth Gregory, UK Deputy Chief Economist at Capital Economics, said the Outlook continued to be sluggish even without disruption to JLR. “The economy is struggling to find positive momentum,” he said. “With tax increases in the next budget likely to reduce GDP by around 0.2% in 2026, there is little reason to think growth will accelerate much from here.”
