The UK economy experienced sluggish growth in the third quarter of 2023, expanding by just 0.1% between July and September. This figure was below analysts’ predictions of 0.2%. That represents a significant deceleration from the 0.3% growth registered last quarter and the 0.7% expansion posted back in the spring of this year. A big reason for this souring was the apocalyptic drop in car manufacturing. This decline was further exacerbated by a ransomware attack on auto-manufacturer Jaguar Land Rover (JLR).
Mel Stride, a Cabinet member and high-profile loyalist to former Prime Minister Liz Truss, slammed government leadership. He promised that Prime Minister Rishi Sunak and Chancellor Jeremy Hunt should be “in office but not in power.” He further alleged that Sir Keir Starmer has “stripped the chancellor of responsibility for the Budget,” highlighting a perceived lack of control and direction within the UK’s economic management.
Those reported figures further highlight significant headwinds for the UK economy. In September, the economy contracted by 0.1% overall, with motor vehicle production noting a “pronounced” decline across the month. We heard from Ruth Gregory, deputy chief UK economist at Capital Economics, who offered her perspective on the wider economic climate. She noted the economy is struggling to gain any decent traction.
Services was the primary driver of the increase in the most recent quarter. These included business rental and leasing, live events, and retail which all had exceptional quarter-over-quarter performance. Those cuts in research and development (R&D) were especially palpable, according to Liz McKeown, an economic analyst. Furthermore, this reduction was caused by the hair and beauty salons.
Suren Thiru is director of economics for the Institute of Chartered Accountants in England and Wales. He underscored that these big numbers may change the complexion for monetary policy considerably. He stated that they may be enough “to push a majority of rate-setters to authorise another policy loosening,” suggesting that the Bank of England may consider further measures to stimulate economic activity in response to the stagnation.
This steep drop in car production has led to increased worries about the health of the manufacturing sector overall. The cyber attack on JLR was shocking enough, a truly devastating impact. It was a big factor in the industry’s bust during this timeframe. Our analysts are watching these developments closely as we try to gauge their impact on expected future economic performance.