UK economy grew just 0.1% between July and September as factory output fell

UK economic growth has decelerated between July and September, compared to the quarter before, according to official statistics, delivering a setback to Chancellor .

The economy expanded by 0.1% over this period, down from the 0.5% growth seen between April and June, reported the Office for National Statistics (ONS). This figure fell short of the 0.2% growth forecasted by economists and comes as Labour introduced a boost in Government spending and business taxes in last month's Autumn .

September saw a dip in the economy, estimated at a contraction of 0.1%, with preceding months having displayed growth. The slowdown was attributed mainly to downturns in factory output and IT services.

Reeves said: "Improving economic growth is at the heart of everything I am seeking to achieve, which is why I am not satisfied with these numbers. At my Budget, I took the difficult choices to fix the foundations and stabilise our public finances."

She added: "Now we are going to deliver growth through investment and reform to create more jobs and more money in people’s pockets, get the back on its feet, rebuild Britain and secure our borders in a decade of national renewal."

The service sector, forming the majority of the economy, stalled in September, only growing by 0.1% over the quarter.

On the manufacturing front, output declined by 0.2% through the three months, led by a sharper fall in September. Contrastingly, the construction sector experienced growth, rising by 0.8% throughout the quarter.

Liz McKeown, ONS director of economic statistics, remarked: "The economy grew a little in the latest quarter overall as the recent slowdown in growth continued." Commenting on various sectors, she added: "Retail and new construction work both performed well, partially offset by falls in telecommunications and wholesale. Generally, growth was subdued across most industries in the latest quarter.

"In September the economy shrank a little. Services showed no growth with a notable increase in car sales offset by a slow month for IT companies. " On the production front, she said: "Production fell overall, driven by manufacturing, though there was an increase in oil and gas extraction."

Ben Jones, lead economist at the Confederation of British Industry, suggested that the anticipation surrounding the autumn Budget had an impact, saying uncertainty "probably played a big part", after businesses indicated a deceleration in investment decisions. He remained optimistic, however: "Hopefully this will prove to be a blip. We still expect the economy to return to a path of modest growth in the year ahead. But downside risks to the outlook have increased."

Suren Thiru, economics director at the Institute of Chartered Accountants in England and Wales, said thatthe economy "went off the boil even before the Budget", pointing to a decline in business and consumer confidence. He reflected on recent performance: "Following a ‘gangbusters’ first half of the year, the third quarter outturn paints a more realistic picture of the UK’s underlying growth trajectory given longstanding challenges over poor productivity and persistent supply side constraints."

"Economic growth in the final quarter of this year is likely to be similarly modest with looming tax rises and growing global uncertainty likely to spark a renewed restraint to spend and invest, despite lower interest rates."

The figures come after Bank of England policymakers decided to cut interest rates by a quarter point to 4.75% in early November, with another decision on rates expected in December. Mr Thiru added: "In spite of these downbeat figures, a December policy loosening looks improbable as rate setters will likely be concerned enough over inflation risks from the Budget and growing global headwinds to resist signing off back-to-back interest rate cuts."

Luke Bartholomew, deputy chief economist at investment giant Abrdn, commented: "With activity growth in September being reported as particularly weak, it is plausible that some of slowing is the result of elevated uncertainty at that time, as firms and households speculated about possible tax changes ahead of the Budget. " "That said, it is also possible that this just represents normal monthly volatility rather than anything more fundamental."

"In any regard, the contents of the Budget ended up somewhat boosting the growth and inflation picture for 2025, and so in that context these data will probably do little to change the thinking at the Bank of England."