UK economy shows slower growth amid budget concerns
The UK economy experienced slower growth than anticipated in the third quarter of 2025, with a reported GDP increase of only 0.1 per cent between July and September, raising concerns about a potential recession, reports BritPanorama.
The Office for National Statistics (ONS) had anticipated a 0.2 per cent growth for this period. However, the latest figures highlight an overall contraction of 0.1 per cent in September, leading City analysts to express unease over the state of the economy.
Production output fell by 0.5 per cent, while the services sector reported a minor increase of 0.2 per cent. Liz McKeown, director of economic statistics at the ONS, noted, “Growth slowed further in the third quarter of the year with both services and construction weaker than in the previous period.” She pointed out that manufacturing was primarily responsible for the downturn in production.
Additionally, a cyber attack on Jaguar Land Rover significantly impacted car production, further compounding the issues facing the manufacturing sector along with declines in pharmaceuticals.
As the nation approaches the Budget announcement, the economic outlook appears tenuous, with impending tax increases and fiscal restraint expected to dampen growth in the forthcoming months.
Rachel Reeves addressed the situation, stating, “We had the fastest-growing economy in the G7 in the first half of the year, but there’s more to do to build an economy that works for working people.” She has signalled intentions to raise taxes by over £30bn, focusing on household income and pension funds.
Economic experts stress the necessity for the Chancellor to create fiscal space to reinforce credibility in bond markets and assist in lowering borrowing costs. Reeves has framed the expansion of the UK economy and fairness as key principles to guide the Budget decisions.
Investment strategist Lindsay James characterized the upcoming Budget as “critical” for averting additional economic decline. “Her next move will be critical if she is to recover Labour’s economic growth mission and prevent any whispers of a recession looming,” he commented.
Andrew Griffith, shadow business secretary, remarked, “With GDP, investment and manufacturing all down, growth is as absent as the phantom plots the Prime Minister frets about.”
While the first half of the year saw an increase of 1 per cent in GDP, attributed to advance purchasing due to anticipated tariff changes from the US, the International Monetary Fund (IMF) projects the UK to surpass all G7 nations except the US by 2025. However, improvements in living standards will still rank among the lowest in the developed world over the next two years.
Treasury officials await the Office for Budget Responsibility’s (OBR) assessment regarding growth downgrades, amid indications that a 0.3 percentage point reduction in productivity trend projections could lead to a £20bn deficit in public finances.
Reeves has attributed the anticipated downgrade in growth to policies of the previous Conservative government, asserting that “governments have always taken the easy option to cut investment in road and rail projects, in energy projects, [and] in digital infrastructure.”
She remains determined to confront the challenges posed by bleak economic forecasts.
The recent economic data presents a complex picture for the UK, highlighting both the potential pitfalls and the resilience required to navigate the upcoming fiscal policy changes. As concerns regarding growth persist, the forthcoming Budget will be critical in shaping the economic landscape and establishing investor confidence moving forward.
