UK growth slows down to crawl in Q3 ahead of crucial budget
Economic growth in the U.K. slowed down to a near standstill in the third quarter of the year, official figures showed Thursday, in what is a blow to the British government less than two weeks ahead of a crucial budget that is expected to see taxes rise again.
The Office for National Statistics said that the economy grew by 0.1% between July and September from the previous three-month period. That was down on the previous quarter's 0.3% increase and below market expectations for a 0.2% rise.
The cyber attack on Jaguar Land Rover, Britain's biggest automaker, was a key reason why growth came in lower than expected. The attack, which saw workers sent home on Aug. 31, halted production in the company's factories as well as suppliers. Operations restarted in October.
The shutdown rippled through the U.K. auto industry. JLR, which is owned by India's Tata Motors, employs more than 30,000 people, with its supply chain supporting tens of thousands more jobs.
The impact was evident in the growth performance in September, with overall industrial output down 2% during the month and car and trailer manufacturing plunging by 28.6%, its sharpest fall since the height of the coronavirus pandemic in April 2020.
It is the latest set of disappointing economic data for the government after the statistics agency revealed earlier this week that U.K. unemployment has risen to 5%, its highest level for four years.
Statistics point towards a weakening economic backdrop ahead of the budget on Nov. 26, which the government has sought to blame on international factors, such as the uncertainty caused by U.S. tariffs.
Treasury chief Rachel Reeves would have been hoping that stronger economic growth could help bolster tax revenues and support spending plans.
"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," she said.
Reeves has provided clear hints that she is going to have to raise taxes in order to plug a hole in the public finances. She is widely anticipated to increase the basic rate of income tax, something no British government has done for 50 years. It would also break a key manifesto pledge of the Labour government.
It's a high-stakes time for the government, which is languishing in the opinion polls barely a year-and-a-half after coming to power and Prime Minister Keir Starmer's favorability ratings deep in negative territory.
Source: Associated Press
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