Concerns are mounting that Rachel Reeves’ proposed ‘big tax’ Budget could steer the UK towards a recession, following disappointing growth figures revealed today.

Experts have expressed alarm over the country’s future after the UK economy managed a mere 0.1 percent GDP growth in the third quarter of this year.

This slight increase comes on the heels of a 0.1 percent contraction in September. With population growth, the GDP per capita showed no growth over the quarter.

The Chancellor attributed the sluggish performance to a significant hacking incident. However, these lackluster figures intensify the pressure as the November 26 Budget announcement looms, where further tax hikes are anticipated.

Reeves and Keir Starmer have emphasized economic growth as the cornerstone of their strategy, recognizing it as essential for enhancing living standards.

Yet, a prominent banker criticized the government’s approach, suggesting that by imposing greater burdens on workers and businesses, it appears they are intentionally trying to decelerate the economy.

There are warnings that the private sector does not have enough ‘underlying strength’ to prevent a fresh squeeze triggering a downturn. 

UK plc eked out a 0.1 per cent GDP expansion in the third quarter of the year, worse than analysts had expected

Rachel Reeves ‘ growth drive suffered another blow today as figures showed the economy close to flatlining

The government’s raid on businesses last year – hiking national insurance for employers – has been widely blamed for crushing activity. 

The cyber attack on Jaguar Land Rover weighed heavily on the manufacturing sector in September. 

UK production output dropped 2 per cent for the month, with car and trailer manufacturing plunging by 28.6 per cent – its sharpest fall since the height of the coronavirus pandemic in April 2020.

The ONS said the drop in car manufacturing, which was linked to the hack as well as a broader decline in commercial vehicle volumes, knocked 0.17 percentage points from GDP for the month.

This also represented a 0.06 percentage point knock for the quarter.

Meanwhile, activity in the services sector slowed to 0.2 per cent for the quarter, from 0.4 per cent in the previous period.

Growth for August was revised down from 0.1 per cent to zero. 

ONS Director of Economic Statistics Liz McKeown said:’Growth slowed further in the third quarter of the year with both services and construction weaker than in the previous period. There was also a further contraction in production.

‘Across the quarter as a whole manufacturing drove the weakness in production. There was a particularly marked fall in car production in September, reflecting the impact of a cyber incident, as well as a decline in the often-erratic pharmaceutical industry.

‘Services were the main contributor to growth in the latest quarter, with business rental and leasing, live events and retail performing well, partially offset by falls in R&D and hair and beauty salons.’

It is the latest set of disappointing economic data after the ONS revealed earlier this week that UK unemployment has risen to 5 per cent, its highest level for four years. 

Asked about the latest GDP figures during a visit to North Wales, the Chancellor told broadcasters: ‘The numbers for this quarter clearly reflect what happened at Jaguar Land Rover: a massive cyber attack, the biggest cyber attack that this country has ever experienced.

‘As a result, car manufacturing fell almost 30 per cent in September. Jaguar Land Rover is now back up and running in part because of the support this Government put in, both to help with the cyber attack itself and also to support the supply chain, so that that business has now begun car production again.’

The UK remains the ‘fastest-growing economy in the G7’ this year to date, Ms Reeves added, though she acknowledged US figures are still yet to be published.

She added there was ‘more to do’ to grow the economy and pointed to the Government’s announcement it will back a small modular nuclear reactor in Anglesey as a step towards growth.

Downing Street admitted the ‘numbers are disappointing’.

‘It’s obviously important to recognise the significance of the cyber attack’ on Jaguar Land Rover, the official added, which is ‘clearly the primary driver behind the weaker September figures,’ the PM’s spokesman said.

‘But we are determined to deliver that growth. We had the fastest-growing economy in G7 in the first half of this year. But there is clearly more to do to build an economy that works for working people.’

Asked whether Ms Reeves should take responsibility for slowing growth, the spokesman said: ‘I don’t accept that.’

However, the Chancellor’s approach was savaged by former NatWest boss Sir Howard Davies.

‘The way the government have been behaving in recent months is such that if they were trying to slow the economy down, I can’t think of anything else I would do,’ he told BBC Radio 4’s Today programme.

‘Because you demonstrate first of all that you have got trouble at the top of the government, you then conduct a series of remarkable leaks suggesting that you are going to tax property, you are going to tax wealth, you are going to tax gambling, you are going to tax banks – you are now going to tax even bikes for goodness sakes.

‘And all of that is a sort of cumulative weighing down and creation of uncertainty.

‘In addition you have legislation which makes it more expensive to hire people and you carry out a policy of public spending whereby public sector wages are going up by 6.6 per cent a year, and private sector by 4.2 per cent.

‘And that is stopping the Bank of England from reducing interest rates which would help as well.’

Nigel Green of the deVere Group said: ‘Recession fears are rising because the signals are lining up at the same time. 

‘Weak output, higher unemployment and looming tax increases form a combination that investors cannot ignore. 

‘People are now asking whether the UK has enough underlying strength to withstand another policy squeeze.’ 

Shadow chancellor Mel Stride said: ‘Today’s ONS figures show the economy shrank in the latest month, under a Prime Minister and Chancellor who are in office but not in power.

The cyber attack on Jaguar Land Rover weighed heavily on the manufacturing sector in September

It is the latest set of disappointing economic data after the ONS revealed earlier this week that UK unemployment has risen to 5 per cent, its highest level for four years 

‘Months after the Prime Minister stripped the Chancellor of responsibility for the Budget, Keir Starmer has now lost control of his own Downing Street operation – with his team openly at war with his Cabinet.

‘If the Prime Minister does not have the backbone to control his team, he has no hope of reducing spending. 

‘Only the Conservatives have a leader with a backbone and a plan to deliver £47billion of savings – allowing us to cut tax and cut the deficit under our Golden Economic Rule.’