ONS: UK economy grows by just 0.1% in three months to September ahead of Autumn Budget

The UK economy grew by just 0.1% in the third quarter of this year, and contracted by 0.1% in September, according to new figures from the Office for National Statistics (ONS).

Gross Domestic Product (GDP) rose lower-than-expected by analysts in the three months to September, and was down from growth of 0.3% in quarter two.

Growth in the latest quarter was driven by rises of 0.2% and 0.1% in the services and construction sectors while the production sector contracted by 0.5%.

MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up

The ONS said monthly GDP shrank by 0.1% in September, following no growth in August and a fall of 0.1% in July.

Car manufacturer Jaguar, which was hit by a major cyber attack in September and shut down its factories for five weeks, was a major contributor to the drop-off in the production sector, said Liz McKeown, director of economic statistics at the ONS.

“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 figures come after the International Monetary Fund (IMF) upped its 2025 UK growth forecast to 1.3%, from 1.1% previously. It expects the UK to have the second-highest growth rate of the G7 after the United States this year.

However, the organisation downgraded its forecasts for 2026, saying it believes the UK economy will grow by 1.3% in 2026, down from a July prediction of 1.4%.

The chancellor 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.”

GDP figures bad news for Reeves

The latest GDP figures will come as a blow to Reeves ahead of the Budget on 26 November as she attempts to kick-start the economy.

Economic growth is one of the core missions of the Labour government as part of its Plan for Change, but quarterly GDP figures show it has progressively slowed since the start of the year.

Consumer spending is also falling. Barclays’ latest Consumer Spend report shows consumer card spending fell by 0.8% year-on-year in October, down from 0.7% the month before.

The high street said its seven measures of consumer and economic confidence, which includes household finances and opinions on the strength of the UK economy, all fell for the first time since August 2022.

Alice Haine, personal finance analyst at investment platform Bestinvest by Evelyn Partners, said: “The lacklustre GDP data will deliver a blow to chancellor Rachel Reeves as she makes the final tweaks to her Autumn Budget in less than two weeks’ time.

“It will also do little to ease the financial strain facing households.”

The chancellor has refused to rule out tax rises in the Budget as the government looks to plug a multi-billion pound hole in its finances.

However, any hikes to income tax could further squeeze households and see economic growth further stagnate, as well as push people out of the country.

It comes as wealth managers at Rathbones and Evelyn Partners said more younger workers are planning to leave the UK due to rising taxes and a poor economic outlook.

As many as 1,800 non-doms left the UK during the 2024/25 tax year too, according to analysis by consultancy Chamberlain Walker, after changes to the tax system.