- ONS reports 0.1% m/m drop in September, slight Q3 rise of 0.1% 
-   Jaguar Land Rover cyber-attack slashes manufacturing output
-   IFS warns London's choices are borrowing, spending cuts, tax hikes
-   Economists expect little improvement by year-end with delay of investment decisions 

By Harry Daniels
LiveSquawk News
@HarryDaniels71

13 November 2025 | 11:30 GMT

LONDON – Rachel Reeves, the UK's Chancellor of the Exchequer, was dealt another blow ahead of next week’s Autumn Budget as UK GDP slowed in September and weakened over the third quarter.

Data from the Office for National Statistics showed economic activity contracted 0.1% in September, missing expectations for a flat reading after August was revised lower to show no growth. Over Q3, GDP rose just 0.1%, two-tenths weaker than in Q2 and below analysts’ forecasts for 0.2%.

Summarising the latest output figures, Liz McKeown, ONS director of economic statistics, said: “Growth slowed further in the third quarter of the year with both services and construction weaker than in the previous period. There was also a further contraction in production.”

Production output plunged 2.0% in September, far exceeding the predicted 0.2% decline. The main drag came from a 28.6% fall in the manufacture of motor vehicles, trailers and semi-trailers, subtracting 0.17 percentage points from monthly GDP.

The quarterly breakdown showed services rose 0.2% and construction edged up 0.1%, offset by a 0.5% drop in the production sector. The report noted that services were the main contributor to growth, with business rental and leasing, live events, and retail performing well, and the sector partially offset by falls in R&D and hair and beauty salons.

Ruth Gregory, deputy chief UK economist at Capital Economics, said most of the September downturn and the muted quarterly reading reflected the sharp hit to manufacturing activity caused by the Jaguar Land Rover cyber-attack, an effect she expects to unwind in Q4.

The episode underscores how dependent the UK remains on a handful of major employers — and how vulnerable the broader economy can be to a prolonged factory shutdown.

“Even so, the big picture is that the economy is struggling to gain decent momentum in the face of higher taxes and soft overseas activity,” she said.

Reeves is expected to break Labour’s 2024 manifesto pledge not to raise taxes on “working people” when she delivers her fiscal blueprint on 26 November — a promise that explicitly covered National Insurance and Income Tax bands as well as VAT.

According to the Institute for Fiscal Studies, the Chancellor now faces three options: borrow more and breach her fiscal rules, cut spending, or raise taxes.

“The first of those options seems unlikely: the Chancellor has (understandably and repeatedly) stated that she will not loosen the fiscal rules,” the IFS said. “As for spending reductions, unpicking detailed departmental spending plans up to 2028–29 set out in June’s Spending Review seems unlikely. Pencilling in cuts to total spending in 2029–30 in order to meet the letter of her targets would be possible but would stretch credulity to breaking point.”

Looking ahead, economists at Deutsche Bank see little sign of momentum improving before year-end. “Quarterly GDP growth will remain range-bound at 0.1%-0.2% q/q,” they said. “We expect budget uncertainty to start impacting spending in October and November, and we expect big investment or hiring decisions to be delayed until the new year.”

The weak run of data is likely to increase pressure on Bank of England policymakers to cut interest rates when they meet for the final time this year in December.