UK economic growth slows ahead of Budget after JLR shutdown

UK economic growth slowed to 0.1% for the past three months in a blow to the Chancellor ahead of the autumn Budget.

Official figures also show the economy declined by 0.1% in September after the cyber attack on Jaguar Land Rover hit activity in the manufacturing sector.

The Office for National Statistics (ONS) said UK gross domestic product (GDP) grew by 0.1% between July and September, following a 0.3% increase between April and June.

The readings were weaker than expected, with economists having predicted growth of 0.2% for the quarter, with expectations that September would show zero growth.

Weakness in September was particularly linked to a tumble in motor manufacturing as JLR’s factories halted production in the face of a damaging cyber attack.

UK production output dropped 2% for the month, with car and trailer manufacturing plunging by 28.6% – its sharpest fall since the height of the coronavirus pandemic in April 2020.

The ONS said the drop in car manufacturing, which was linked to the hack as well as a broader decline in commercial vehicle volumes, knocked 0.17 percentage points from GDP for the month.

This also represented a 0.06 percentage point knock for the quarter.

Meanwhile, activity in the services sector slowed to 0.2% for the quarter, from 0.4% in the previous period.

Chancellor Rachel Reeves blamed the weaker performance on the JLR shutdown.

She said: “The numbers for this quarter clearly reflect what happened at Jaguar Land Rover: a massive cyber attack, the biggest cyber attack that this country has ever experienced.”

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.

“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.”

The ONS also said the economy showed zero growth in August, in a downward revision from its previous estimate of 0.1%.

It is the latest set of disappointing economic data for the Government after the ONS revealed earlier this week that UK unemployment has risen to 5%, its highest level for four years.

Statistics point towards a weakening economic backdrop ahead of the Chancellor’s autumn Budget on November 26.

Growth in the latest quarter marked the weakest quarterly performance since the economy slipped into a mild recession at the end of 2023.

Rachel Reeves had been hopeful that stronger economic growth can help increase tax revenues and support Government spending plans.

In response to the latest data, Ms Reeves added: “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.”

The weaker-than-expected economic growth has contributed to growing expectations that the Bank of England will cut interest rates at their vote next month.

Rob Wood, chief UK economist at Pantheon Macroeconomics, said: “Growth undershooting the MPC’s forecast of 0.2% all but seals a December rate cut when added to the weak jobs data published on Tuesday.”

Interest rates currently sit at 4% and are likely to be cut to 3.75%, according to the financial markets.