UK growth slows after big fall in car production

The growth of the UK economy slowed to 0.1 per cent in the July-to-September period, according to official estimates.

The figure was below analysts' predictions and comes less than two weeks before the Budget, in which Chancellor Rachel Reeves is expected to raise taxes. Ms Reeves has consistently stated that increasing growth is her highest priority.

The Office for National Statistics (ONS) reported that there had been a "significant" decrease in vehicle production in September, following a cyber-attack on Jaguar Land Rover. However, even if this were taken out, other areas of the economy showed weak growth.

Although there was an increase in services—which includes sectors like shops, restaurants, arts, and entertainment—and in construction, this growth was slower than in the previous quarter. Consumer demand remains weak, and economists expect this will continue to stifle growth for the remainder of the year.

The economy shrank by 0.2 per cent in September alone. The cyber-attack on JLR, which began on 31 August and halted production for five weeks, had a major effect. The ONS stated that overall production dropped by 2 per cent in September, mainly due to a 28.6 per cent drop in vehicle output following the attack.

According to some analysts, the slower-than-expected growth figures have increased the chances of a rate cut from the Bank of England next month. Rob Wood, chief economist at Pantheon Macroeconomics, said the data "all but seals a December rate cut."

Allan Jones, managing director of pie manufacturer TC Morris in Dudley, West Midlands, said the cost of running his company, which employs approximately 50 people, has risen by £200,000 this year.

"I believe there is a limit to what people are able to pay for a pork pie. So we've been able to pass on some increases, but we've had to absorb quite a bit," he said. Mr Jones said he hoped to "see some easing" from the forthcoming Budget, including lower taxes, lower fuel prices, and increased "investment opportunities" in the form of government-backed grants.

Political Reaction

Ms Reeves said the UK had the fastest-growing economy in the G7 in the first half of the year, but added, "there's more to do to create a working economy."

"I will take the appropriate action to create a healthy economy that will help us to reduce waiting lists, reduce national debt, and lower the cost of living," she said, referencing her Budget later this month.

In response, 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."

Analyst Outlook

ONS chief of economic statistics, Liz McKeown, said: "There was a particularly marked drop in vehicle production in September," highlighting the effects of the cyber-attack as well as a decrease in the "often volatile pharmaceutical industry."

"Services were the key contributor to growth in the latest quarter, with office leasing, live performances, and retail sales all doing well, partially offset by declines in R&D and hair and beauty salons."

Ruth Gregory, deputy chief UK economist with Capital Economics, said that even accounting for the JLR cyber-attack, the economy is "struggling to recover good momentum."

"With tax increases in the upcoming Budget likely to reduce GDP by around 0.2 per cent... there is no reason to believe that GDP growth will increase much from here," she said.