The UK economy experienced slower growth than anticipated in the third quarter of the year, amid a prevailing sense of unease across the nation ahead of the Budget.
The Office for National Statistics (ONS) reported a mere 0.1 per cent GDP growth between July and September, sparking concerns among City analysts about a potential recession on the horizon. Economists had previously predicted a 0.2 per cent growth for this three-month period.
According to the statisticians, production output fell by 0.5 per cent while the services sector saw a slight increase of 0.2 per cent.
On a monthly basis, the UK economy contracted by 0.1 per cent in September.
“Growth slowed further in the third quarter of the year with both services and construction weaker than in the previous period,” said Liz McKeown, director of economic statistics at the ONS, as reported by City AM.
“Across the quarter as a whole manufacturing drove the weakness in production.”
McKeown also noted the cyber attack on Jaguar Land Rover contributed to a “particularly marked fall in car production”, alongside a decline in the pharmaceutical industry.
These results may trigger alarm ahead of the Budget, with impending tax increases and fiscal restraint likely to further suppress growth in the upcoming months.
Rachel Reeves said: “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.”
Reeves is widely anticipated to increase taxes by more than £30bn, focusing on household income alongside pension funds and gamblers. .
Economic experts have also cautioned that the Chancellor must establish greater fiscal breathing room to secure credibility within bond markets and assist in reducing borrowing costs. .
Reeves has said that expanding the UK economy represented one of two “principles” designed to steer her Budget, together with introducing “fairness” in policy development.
She suggested that a Labour manifesto commitment not to increase income tax would be breached. .
Lindsay James, investment strategist at Quilter, described the Budget as “critical” for avoiding further economic decline.
“Her next move will be critical if she is to recover Labour’s economic growth mission and prevent any whispers of a recession looming,” James said.
Andrew Griffith, shadow business secretary said: “With GDP, investment and manufacturing all down, growth is as absent as the phantom plots the Prime Minister frets about.”
The UK economy experienced a boost in expansion during the first six months of the year, recording a one per cent increase in GDP. Economists attribute this to advance purchasing by companies and households anticipating possible tariff declarations from President Trump.
The International Monetary Fund (IMF) said the UK would surpass all G7 nations except the US in 2025, though improvements in living standards, gauged through GDP per capita, would rank lowest among the seven developed economies over the coming two years.
Treasury officials will be keenly awaiting the Office for Budget Responsibility (OBR)’s final verdict on its growth downgrades following its assessment of productivity patterns.
City analysts have indicated a 0.3 percentage point reduction to productivity trend projections could create a £20bn hole in public finances alone.
Reeves has attributed a downgrade in growth predictions to the former Conservative administration.
“The reason why our productivity and our growth has been so poor in these last few years is because governments have always taken the easy option to cut investment in road and rail projects, in energy projects, [and] in digital infrastructure,” she told the BBC this week.
Reeves has also stated the government would endeavour to overcome pessimistic economic projections. .
