Rachel Reeves faces mounting criticism as UK economic growth slowed to just 0.1% in the third quarter, raising fears of a 'doom loop' where tax rises and spending cuts further squeeze activity. The chancellor's autumn budget, expected to include significant fiscal consolidation, risks exacerbating the weakness, with GDP per head stagnating and consumer-facing services output falling 0.1%.
The slowdown was partly driven by a cyber-attack on Jaguar Land Rover (JLR), which caused car output to collapse by 28.6% and shaved 0.16 percentage points off quarterly GDP. The government provided a £1.5bn loan guarantee to JLR, though the company did not use it, instead paying suppliers upfront.
Business investment fell 0.3% in the quarter, and export volumes also declined. Critics point to the employers' national insurance increase in last year's budget as weighing on hiring and costs, while ongoing fiscal uncertainty deters spending. Inflation remains near twice the Bank of England's 2% target, and unemployment is at a four-year high.
Despite the UK being the fastest-growing G7 economy after the US, the underlying picture is weak. The Bank of England is expected to cut interest rates in December, which Reeves will need amid pressure from Labour ranks. With a budget shortfall of up to £30bn, the chancellor faces a tightrope walk to rebuild confidence on 26 November.
