Economy grew by 0.1% in third quarter, official figures show

The UK’s economic slowdown gathered further momentum during the third quarter of the year with growth of just 0.1%, according to an early official estimate that makes horrific reading for the Chancellor.

The Office for National Statistics (ONS) reported a surprise contraction for economic output during September of -0.1% – with some of the downwards pressure being applied by the cyber attack disruption to production at Jaguar Land Rover.

The figures for July-September followed on the back of a 0.3% growth performance over the previous three months and the 0.7% expansion achieved between January and March.

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The encouraging start to 2025 was soon followed by the worst of Donald Trump‘s trade war salvoes and the implementation of budget measures that placed employers on the hook for £25bn of extra taxes.

Economists have blamed those factors since for pushing up inflation and harming investment and employment.

ONS director of economic statistics, Liz McKeown, said: “Growth slowed further in the third quarter of the year with both services and construction weaker than in the previous period. There was also a further contraction in production.

“Across the quarter as a whole manufacturing drove the weakness in production. There was a particularly marked fall in car production in September, reflecting the impact of a cyber incident, as well as a decline in the often-erratic pharmaceutical industry.

“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 [research and development] and hair and beauty salons.”

The weaker than expected figures will add fuel to expectations that the Bank of England can cut interest rates at its December meeting after November’s hold.

The vast majority of financial market participants now expect a reduction to 3.75% from 4% on 18 December.

Data earlier this week showed the UK’s unemployment rate at 5% – up from 4.1% when Labour came to power with a number one priority of growing the economy.

Since then, the government’s handling of the economy has centred on its stewardship of the public finances.

The chancellor was accused by business groups of harming private sector investment and employment through hikes to minimum wage levels and employer national insurance contributions.

The Bank has backed the assertion that hiring and staff retention has been hit as a result of those extra costs.

There is also evidence that rising employment costs have been passed on to consumers and contributed to the UK’s stubbornly high rate of inflation – a figure that is now expected to ease considerably in the coming months.

Rachel Reeves has blamed other factors – such as Brexit and the US trade war – for weighing on the economy and leaving her facing a similar black hole to the one she says she inherited from the Conservatives.

Her second budget is due on 26 November.

She said of the latest economic data: “We had the fastest-growing economy in the G7 in the first half of the year, but 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.”

Shadow chancellor Sir Mel Stride responded: “Today’s ONS figures show the economy shrank in the latest month, under a Prime Minister and Chancellor who are in office but not in power.”