The UK economy experienced a significant slowdown in the third quarter of 2025, with growth dampened by uncertainty surrounding the upcoming Autumn Budget, according to a poll of economists.
Economic Growth Cools Amid Fiscal Uncertainty
A Bloomberg poll of economists has estimated that the UK economy grew by just 0.2 per cent in the third quarter of the year. This marks a drastic slowdown compared to the one per cent growth witnessed in the first six months of 2025, which was largely driven by companies front-loading activity ahead of President Trump's tariff announcements.
The slowdown was particularly evident in September, with the poll predicting zero growth for the month. This is lower than the 0.1 per cent rise in GDP recorded in August.
Economists are pointing the finger at speculation ahead of the Budget on 26 November, when Chancellor Rachel Reeves is expected to raise around £30bn in taxes. The Bank of England’s monetary policy report confirmed that spending levels across the UK economy have slumped due to this Budget speculation, with businesses reporting waning demand driven by increased uncertainty.
Government Spending and Labour Market in Focus
Despite the broader slowdown, there is a silver lining. Sanjay Raja of Deutsche Bank noted that growth hopes are being supported by high government spending, which is estimated to have surged by 0.6 per cent in the quarter. Public sector investment is also expected to have risen by one per cent.
Emma Wilks, UK economist at HSBC, offered a note of mild optimism ahead of the Office for National Statistics (ONS) data release this Thursday. "The bar is low for good news on the UK economy," Wilks said, adding that recent data shows signs of economic stabilisation, including upside surprises in October's PMIs from S&P Global.
Unemployment and Interest Rate Decisions Loom
Attention is now turning to crucial labour market data to be published on Tuesday. The previous set of data revealed the unemployment rate had inched up to 4.8 per cent, while wage growth dropped slightly to 4.7 per cent in the three months to August.
City analysts forecast that the unemployment rate could climb further to 4.9 per cent, with pay growth (excluding bonuses) potentially falling to 4.6 per cent. This data will be pivotal for the Bank of England's next interest rate decision in a month's time. A weaker labour market could persuade Governor Andrew Bailey and other Monetary Policy Committee members to vote for a 25 basis point rate cut, providing the economy with more firepower.
