UK economic growth slows to 0.1% ahead of Budget
The latest data show that the UK’s economy grew by just 0.1% over the last quarter, as Chancellor Rachel Reeves prepares for a difficult budget that could include tax hikes.
According to data from the Office for National Statistics (ONS), UK real gross domestic product (GDP) is estimated to have increased by 0.1% in Q3 2025, compared with growth of 0.3% in the second quarter of the year.
Last quarter’s subdued growth was driven largely by increases of 0.2% and 0.1% in the services and construction industries respectively.
Lower-than expected growth was driven largely by a cyber incident that paused production at a major vehicle manufacturer in September, contributing to a 28.6% decline in the manufacture of motor vehicles, trailers, and semi-trailers that month.
This drop in vehicle production detracted 0.17 percentage points from monthly GDP, with the Society of motor Manufacturers and Traders categorising the cyber incident as “a Category 3 systemic event”.
ONS data also revealed that there was a 0.2% increase in real household final consumption expenditure in Q3 2025, which is now 0.7% higher compared with the same quarter a year ago.
Growth within household consumption was driven by clothing and footwear, recreation, and culture.
Reeves braces UK for tax hikes in Budget
This lower-than-expected economic growth comes as Chancellor Rachel Reeves prepares to deliver a difficult Budget later this month.
While she has said her team is still preparing the Budget, Reeves has explicitly not ruled out increases to taxes, despite Labour’s election manifesto pledge not to raise taxes for working people.
“So those final decisions haven’t been taken yet, but as I take those measures, I will do what I believe is right for our country, and sometimes that means not always making the easy decisions, but the decisions that I think are in our national interest,” Reeves told the BBC earlier this week.
“It would, of course be possible to stick with the manifesto commitments, but that would require things like deep cuts in capital spending, and the reason why our productivity and our growth has been so poor these last few years is because governments have always taken the easy option to cut investment in rail and road projects, in energy projects, in digital infrastructure,” she said.
