UK economic growth slowed in the third quarter, placing greater pressure on the Chancellor ahead of the Budget.
In the final figures released before the Autumn Budget, the Office for National Statistics said the economy grew by just 0.1% between July and September, compared to 0.3% growth in the second quarter.
Growth was driven by increases of 0.2% in services and 0.1% in construction. However, production fell by 0.5% during the quarter, with a cyber-attack at Jaguar Land-Rover in September leading to an overall drop of 28.6% in UK car manufacturing output.
Danni Hewson, head of financial analysis at AJ Bell, said: “Growth was held up by this government as a panacea. But the sums never seemed to add up and the chancellor is now faced with the prospect of breaking manifesto commitments and then trying to foster the confidence needed to deliver growth whilst taking billions out of people’s pockets through tax hikes.
“The contraction in September can partly be explained by that debilitating cyber-attack on Jaguar Land Rover, but when you strip out population growth the economy simply stalled over the summer. It’s a long way from the economy bounce the country enjoyed at the start of the year when many companies were front loading production in order to beat Donald Trump’s tariffs.
“Starmer and Reeves need to dust themselves off and be ready to sell what are expected to be uncomfortable decisions to the country if they want to prevent more months of negative growth.”
Lindsay James, investment strategist at Quilter, said: “The UK economy is struggling to maintain momentum as we head towards year-end. The three-month rate shows growth of just 0.1%, a step down from the 0.7% seen in Q1 and the 0.3% delivered in Q2. This paints a picture of an economy that started 2025 strongly but is now badly losing steam just as the Chancellor prepares for a pivotal Autumn Budget. Her next move will be critical if she is to recover Labour’s economic growth mission and prevent any whispers of a recession looming.
“The nature of this Budget remains crucial for what comes next. Encouragingly, inflation appears to have peaked. However, uncertainty over potential tax rises and persistent rumours of employers being targeted yet again risks snuffling out fragile business confidence and pushing unemployment.
“If the Government is serious about stimulating growth, the Budget must restore confidence and avoid measures that risk adding further inflationary pressure or denting the labour market.”
Main image: luke-chesser-pJadQetzTkI-unsplash
