The UK economy lost significant momentum in the third quarter of the year, according to official data, with growth slowing to a near standstill and putting pressure on household finances.
Stagnant Growth and a Manufacturing Downturn
New figures from the Office for National Statistics (ONS) show that Gross Domestic Product (GDP) grew by a mere 0.1% between July and September. This marks a clear deceleration from the 0.2% expansion recorded in the previous quarter, signalling a cooling economic climate.
A primary driver behind the slowdown was a pronounced weakness in industrial production. The ONS reported a "marked drop" in car manufacturing, which effectively cancelled out modest gains within the dominant services sector. This manufacturing slump had a tangible drag on the nation's overall economic output for the three-month period.
Cyberattack Impact and Household Squeeze
Industry analysts suggest the massive cyberattack on Jaguar Land Rover, which forced a weeks-long production halt, contributed significantly to the decline in factory output. The disruption created measurable ripples across the supply chain and the wider economic figures.
Concurrently, British households are feeling the strain. The household saving ratio fell to 9.5% in the third quarter, its lowest point in a year. This indicates that the rising cost of living is forcing many to dip into their reserves to cover everyday expenses.
Furthermore, real household disposable income per head dropped by 0.8% in the same period, following zero growth in the quarter before. This consecutive decline underscores the ongoing financial pressure facing families nationwide.
Bank of England Response and Future Outlook
In reaction to the sluggish economic indicators, the Bank of England recently cut interest rates to 3.75%. The move is designed to stimulate borrowing and economic activity, offering some relief to mortgage holders and businesses.
While the UK enjoyed the strongest growth among G7 nations in the first half of 2024, it has since lost that leading position. Economists cite pre-budget uncertainty and tax concerns as potential factors behind the loss of pace.
Looking ahead, the Bank of England anticipates zero GDP growth for the current October-to-December quarter, although it estimates the underlying growth rate remains around 0.2%. Despite the recent quarterly dip, GDP for the whole of 2024 is still estimated to be 1.1% higher than in 2023.
