From the ONS’s latest report, that UK economy went on to contract by 0.1% in September. This significant contraction is a symptom of continued adverse economic conditions. This drop has largely been attributed to a substantial decline in car production. This recent decline is attributed to a major cyber-attack on Jaguar Land Rover (JLR). Though analysts were projecting 0.2% growth for the third quarter, making this surprise negative contraction all the more worrying.
This was as well the case for the UK economy, which shrank by 0.1% between July and September. This represents a significant deceleration from the 0.3% growth rate recorded in Q2. At the beginning of this year, the economy grew by just 0.7% during the first quarter. This growth seems a world away from the recent numbers. In fact, the ONS insisted that services were central to maintaining growth. Business rental and leasing, live events and entertainment, and retail sectors led the way. This just barely was offset by losses in research and development and hair and beauty salons.
That’s where the cyber attack on JLR hit the hardest. It’s been a drag on GDP growth at a pivotal time for the auto industry. Car manufacturing is hugely important to the UK economy. This unfortunate ongoing incident has raised the alarm about the fragility of our economy in the years to come.
Suren Thiru, ICAEW’s economics director, explained why this is such a perilous time. He thinks these numbers might lead more rate-setters to vote in favour of another dose of policy loosening. This signals an important potential shift in monetary policy as officials weigh and play their hand amid an uncertain economic landscape.
We interviewed Ruth Gregory, deputy chief UK economist with Capital Economics, to learn more about the current economic climate. She noted that the economy “is just beginning to get any pretty good momentum,” while stressing the plight of many in America’s sectors.
In political circles, the economic decline has led to reactions from shadow chancellor Mel Stride. In particular, he laid into PM Rishi Sunak and Chancellor Jeremy Hunt. He claimed that they are “in office but not in power.” Stride’s comments reflect growing frustrations within the opposition regarding the government’s handling of economic issues. Additionally, Sir Keir Starmer has purportedly “stripped the chancellor of responsibility for the Budget,” further complicating the political narrative surrounding economic management.
Rachel Reeves, who has a strong shot at becoming the next Chancellor in her response to the economic conditions admitted that it must get better. She stated that “there’s more to do to build an economy that works for working people,” highlighting ongoing challenges in achieving sustainable growth.
As the government prepares for future fiscal decisions, Reeves has indicated that at her upcoming Budget address, she 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.” That’s a strong signal of a proactive approach focused on urgent economic needs while laying the groundwork for future stability.