UK growth slower than expected in third quarter

Growth in the UK economy slowed by more than expected to 0.1% in the July-to-September period, official figures show, as car production slumped.

The figure was below the 0.2% predicted by analysts, and is a blow to Chancellor Rachel Reeves less than two weeks ahead of the Budget in which she is widely expected to raise taxes.

Figures from the Office for National Statistics (ONS) show the biggest hit to growth in the quarter came from a “marked” fall in car production as a result of the cyber-attack on Jaguar Land Rover.

But even when this is taken out, other sectors of the economy showed weak growth.

While there was growth in services – which includes things like shops, restaurants, arts and entertainment and real estate – and construction, they were weaker than in the previous quarter.

The latest GDP figure marks a slowdown from the 0.3% growth seen in the previous quarter, and the 0.7% expansion in the first three months of the year.

The Jaguar Land Rover cyber-attack began on 31 August, and resulted in one of the UK’s largest car makers halting production for five weeks.

The ONS said production output overall fell by 2% in September, and this was mainly caused by a 28.6% drop in car output following the attack.

Responding to the ONS data, Reeves said the UK had the fastest-growing economy in the G7 in the first half of the year, but said “there’s more to do to build an economy that works for working people”.

“At my Budget later this month, I will take the fair decisions to build a strong economy that helps us to continue to cut waiting lists, cut the national debt and cut the cost of living,” she said.

Shadow chancellor Mel Stride said the prime minister and chancellor were “in office but not in power” and claimed Sir Keir Starmer had “stripped the chancellor of responsibility for the Budget”.

ONS director of economic statistics Liz McKeown said: “Services were the main contributor to growth in the latest quarter, with business rental and leasing, live events and retail performing well, partially offset by falls in R&D and hair and beauty salons,” she said.

Ruth Gregory, deputy chief UK economist with Capital Economics, said that even without the drag on GDP growth by the JLR cyber-attack, the economy “is struggling to gain decent momentum”.

“With tax rises in the upcoming Budget likely to trim GDP by around 0.2% in 2026, there is little reason to think that GDP growth will accelerate much from here,” she said.

The weakness of the figures led some analysts to suggest there was now an increased chance of the Bank of England cutting interest rates when it meets next month.

Suren Thiru, economics director for the Institute of Chartered Accountants in England and Wales, said the figures may be enough “to push a majority of rate-setters to authorise another policy loosening”.