GDP Slips to 0.1% as Jobs Weakens, Borrowers Could Benefit from a Sixth Rate Cut Before Christmas

UK economic growth slowed sharply to 0.1% in the three months to September, falling short of the 0.2% expected by analysts. The latest figures put additional pressure on Chancellor Rachel Reeves ahead of the November Budget and highlight weakening demand across key sectors. With inflation easing and the jobs market cooling, economists now believe a sixth interest rate cut before Christmas is increasingly likely.

The Office for National Statistics reported a 2% drop in production output for September, driven mainly by a 28.6% collapse in car manufacturing after a cyberattack forced Jaguar Land Rover to halt operations. Analysts say this isolated disruption masked what would have otherwise been modest underlying growth.

Despite small gains earlier in the summer, both construction and services have seen demand weaken as households and businesses delay spending decisions. Economists warn that slowing output underscores fragile confidence across the economy.

With the Autumn Budget approaching, economists say the Chancellor faces a difficult balancing act. Growth has been positioned as the government’s route to improving public services without raising taxes—but the latest data challenges that narrative. Rachel Reeves is now expected to announce significant tax increases, which could further pressure household budgets.

Analysts warn that a weakening labour market—highlighted by unemployment hitting 5%, a four-year high—combined with slowing pay growth may stretch families even further over the coming months.