The UK economy recorded a tepid growth rate of just 0.1 % in the July-to-September quarter, sharply below the 0.2 % forecast and down from the 0.3 % expansion seen in the previous quarter.
This disappointing performance presents a significant setback for Chancellor Rachel Reeves, who has repeatedly emphasised growth as her top priority ahead of her upcoming Budget.
Major drag from car-production slump
A key contributor to the slowdown was a dramatic fall in manufacturing output in September, when production contracted by around 2 %.
The collapse is largely attributed to a cyber-attack that stalled production at Jaguar Land Rover (JLR), triggering a 28.6 % plunge in motor-vehicle output and leaving a substantial dent in quarterly GDP.
The disruption alone subtracted an estimated 0.06 percentage points from Q3 growth and 0.17 points in September alone.
Weakness beyond cars – services and construction lose momentum
Although the services sector – including retail, real-estate leasing and live events – continued to contribute to growth, its pace decelerated compared with earlier quarters. The construction sector also grew, but only marginally.
Consumer spending remains fragile, and business investment fell, signalling that the headwinds are broad-based rather than confined to automotive manufacturing.
Fiscal & monetary pressures mounting ahead of Budget
The weak GDP print raises the urgency of the forthcoming Budget, expected on 26 November, where the Chancellor may announce tax rises to plug a growing fiscal shortfall.
Meanwhile, the soft data has boosted market expectations that the Bank of England may cut interest rates in December. Estimates for a cut are now as high as 80 %-plus.
Momentum fading after stronger start to the year
The tepid Q3 outcome arrives after somewhat stronger early-year growth – 0.7 % in Q1 and 0.3 % in Q2.
Analysts warn that with tax rises widely expected in the Budget, momentum may weaken further, perhaps trimming GDP by another 0.2 % in 2026 alone.
In the Chancellor’s words
Chancellor Reeves responded by pointing out that the UK economy had been the fastest-growing among the G7 in the first half of the year, but acknowledged that “there’s more to do to build an economy that works for working people.”
Opposition figures, however, were less kind: Shadow Chancellor Mel Stride claimed that the Prime Minister and Chancellor were “in office but not in power”.
Recovery ahead, but clouds remain
While the hit from the cyber-attack is expected to correct itself in Q4 — the Bank of England projects a rebound of around 0.3 % growth — structural challenges remain. High taxes, weak household spending and low business investment suggest the UK economy faces a sluggish path unless policy support arrives.
