Britain’s economic growth slowed sharply in the third quarter, rising just 0.1% between July and September, as a sharp fall in car production and subdued consumer spending weighed on activity ahead of the Chancellor’s Budget later this month.
The figure released by the Office for National Statistics was below analyst expectations of 0.2% and represents a significant slowdown from the 0.3% growth recorded between April and June and the 0.7% expansion earlier in the year.
The ONS said the downturn was due to a “significant” fall in car production after a cyberattack on Jaguar Land Rover forced Britain’s largest carmaker to halt production for five weeks. The attack, which began on Aug. 31, caused auto production to plunge 28.6% in September and pushed overall output down 2%.
Even ignoring disruptions in the automotive sector, the overall economy showed signs of fragility. Growth in services and construction slowed quarter-on-quarter, with consumer spending remaining weak as households continue to grapple with high living costs and uncertainty ahead of the Budget on November 26.
Economists warned that the weaker-than-expected numbers underscore the challenges facing Chancellor Rachel Reeves, who has repeatedly put economic growth at the center of her agenda but is widely expected to announce tax rises to plug a budget deficit.
Some analysts now believe the weak GDP data increases the likelihood of a rate cut by the Bank of England as early as December. Rob Wood, chief UK economist at Pantheon Macroeconomics, said the figures “all but seal a rate cut in December”, particularly when combined with the disappointing jobs numbers released earlier this week.
For many businesses, the slowdown reflects the lingering impact of last year’s budget, which increased employers’ social security contributions and increased the national living wage.
Allan Jones, managing director of TC Morris, a cake manufacturer in Dudley which employs around 50 people, said its operating costs had risen by £200,000 this year.
“I think there’s a certain level at which people are willing to pay for a pork pie,” he said. “We managed to pass on some increases, but we had to absorb a lot. We need some relief in the budget – lower taxes, lower energy costs and more support for investments.”
Responding to the data, Reeves said the UK was still the G7’s fastest-growing economy in the first half of the year, but acknowledged that “there is still more to do to build an economy that works for working people”. She said her upcoming budget would make “fair decisions” to cut waiting lists, reduce the national debt and lower the cost of living.
Shadow Chancellor Mel Stride accused the government of a loss of authority and argued that Sir Keir Starmer had “taken responsibility for the budget away from the Chancellor”.
Liz McKeown, ONS director of economic statistics, highlighted a “particularly significant decline” in car production due to the cyber incident and a decline in the volatile pharmaceutical sector.
“Services contributed the most to growth,” she said, “with corporate rentals and leasing, live events and retail performing well, partially offset by declines in research and development and hair and beauty salons.”
Ruth Gregory, deputy chief UK economist at Capital Economics, said the outlook remained cloudy even without JLR’s disruptions. “The economy is struggling to get going properly,” she said. “With tax increases in the coming budget expected to shave around 0.2% off GDP in 2026, there is little reason to believe growth will accelerate significantly from here.”
