In September, the UK economy contracted by 0.1%. This drop comes on the heels of strong growth of 0.3% in Q2, representing a much sharper deceleration. The Office for National Statistics (ONS) looked at the reasons behind this decline. One big factor was the steep decline in car production, primarily from a cyber attack on Jaguar Land Rover (JLR).
In the July-to-September period, the economy’s growth slowed to just 0.1%, falling short of analysts’ expectations of 0.2%. At the start of this year GDP bounced back, growing by 0.7% in the first quarter. This increase stands in stark contrast with past numbers. The ONS data pointed to the dramatic slump in car production during this period, deepening the overall downturn substantially.
Ruth Gregory, the deputy chief UK economist with Capital Economics, commented on the current economic climate, stating that “the economy is struggling to gain decent momentum.” This ambivalence towards change captures long-standing doubts about the sustainability of growth within the UK.
Suren Thiru, economics director for the Institute of Chartered Accountants in England and Wales, said the figures are “disappointing.” He hopes that these numbers will lead the monetary policy rate-setters to reconsider their policies. He suggested that such data could be enough “to push a majority of rate-setters to authorise another policy loosening.”
While car production lost a lot of steam, much of the rest of the economy held up pretty well. Services became the largest driver of growth for the most recent quarter. Business rentals, leasing, live events, and retail activities flourished. Those increases were partially offset by losses in research and development (R&D) and hair and beauty salons.
Shadow Chancellor Mel Stride attacked the government’s current leadership. He claimed that the Prime Minister and Chancellor are “in office but not in power.” He further claimed that Sir Keir Starmer had effectively “stripped the chancellor of responsibility for the Budget,” highlighting the political tensions surrounding economic management.
Fellow Labour politician Rachel Reeves, shadow chancellor, focused on the need for more to be done to strengthen the economy. She stated that “there’s more to do to build an economy that works for working people.” In her upcoming Budget announcement, she pledged to make “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.”
The most recent ONS figures present a nuanced picture of the UK economy. Though some sectors, such as the medical device manufacturing sector, show promise, obstacles are still daunting. Flagship industries such as car manufacturing feel the brunt of this downturn. It’s heartening to see that policymakers are already on the case addressing these issues. We hope they will continue to build on their success developing plans that jumpstart long-lasting economic prosperity.