The UK economy nearly stalled in the third quarter, with GDP growth slowing sharply to just 0.1%, weighed down by a cyberattack that crippled production at Jaguar Land Rover and mounting fears over potential tax hikes in the upcoming Labour government budget.

Official data from the Office for National Statistics showed the meager expansion marked a slowdown from 0.3% growth in Q2 and fell short of the 0.2% forecast by economists and the Bank of England. The economy contracted 0.1% in September alone as a steep manufacturing decline offset marginal service sector gains. Sterling initially dipped before recovering amid broader dollar weakness, while UK government bonds held steady.

After leading G7 growth in early 2024, Britain has reverted to sluggish expansion. Mounting evidence—from housing markets to business surveys—suggests consumers and firms are delaying spending decisions ahead of Chancellor Rachel Reeves' November 26 budget, expected to impose significant tax increases.

"With tax pressures mounting and overseas demand weak, the UK economy lacks meaningful growth momentum," said Ruth Gregory, deputy chief UK economist at Capital Economics. "The budget's likely tax measures could shave 0.2% off 2026 GDP, leaving little room for acceleration."

Household and government spending saw only modest Q3 gains, while business investment fell for a second consecutive quarter. With downgraded growth forecasts and costly policy reversals blowing a multibillion-pound hole in Reeves' fiscal rules, the Chancellor faces pressure to break election pledges with sweeping tax rises—creating political headaches for Labour amid infighting allegations.

The slowdown may reinforce Bank of England Governor Andrew Bailey's view that inflationary pressures are easing. Traders now price in over 80% odds of a December rate cut after unemployment hit pandemic-era highs.

**Jaguar Land Rover Cyberattack Slams Output** September's contraction stemmed partly from a cyberattack that forced Jaguar Land Rover—Britain's largest automaker—to halt production for over five weeks. The disruption rippled through hundreds of suppliers, prompting a £1.5 billion ($2 billion) government loan guarantee. Auto manufacturing plunged nearly 30%—the steepest drop since 2020—dragging GDP down by 0.17 percentage points. Overall manufacturing fell 1.7%, while services eked out 0.2% growth.

**US Trade Woes Deepen** UK goods exports to the US tumbled 11.4% (£500 million) to their lowest level since January 2022, with declines across most categories following April's tariff announcements. Total exports dipped 0.1% in Q3 while imports fell 0.3%.