UK GDP fell 0.1% month-on-month in September, below expectations for no growth and following a 0.1% rise in August, the latest figures from the ONS show.
As a result, GDP rose just 0.1% in the three months to September, down from 0.7% in Q1 and 0.3% in Q2.
The figures prompted whispers of a 'recession looming' amongst industry experts, with many saying a December rate cut is all but certain, but others raising concerns about what measures could be announced in the Budget.
Derrick Dunne, CEO of YOU Asset Management, commented: “GDP growth for Q3 has come in painstakingly low. With unemployment rising and inflation too high for comfort, the economic outlook for the UK now couldn’t be more disconcerting. There are two big questions now to consider: what does the Chancellor do in light of these numbers? And how does the Bank of England respond to this?
"While we can’t be sure what Reeves’s announcements will contain, there is rising certainty now that rate setters will cut in December. This is still something of a gamble with inflation at the level it is, but most indications suggest that this should begin to recede quite quickly into the new year.
“The next question then is what rate cuts will do to the economy. Like when rates were rising, the effects of changes to the central policy rate take time to feed through to the wider economy, hence why the Bank is likely to act in December and not in six months when inflation is closer to target.
“What happens next in the economy ultimately comes back to impending fiscal decisions made in Whitehall, how inflationary they are and whether households are squeezed broadly by tax hikes, or we see changes that have unexpected distortionary effects on the wider economy."
James Bentley, director at Financial Markets Online, agreed: “Suddenly the chances of an interest rate cut before Christmas are on a par with the likelihood of mince pies and syrupy TV ads.
“The GDP data confirms that Britain's economic growth has all but ground to a halt. While the stagnation can be partly blamed on the punishing 28.6% drop in car-making seen during the third quarter, the UK's economic weakness is widespread and entrenched.
“With unemployment surging and job vacancies sliding, the labour market reveals just how fragile business sentiment has become in the face of flatlining demand and pre-Budget anxiety.
“Last week the Bank of England said that, in its view, inflation has peaked. Despite narrowly voting to not cut the base rate immediately, the Bank’s Monetary Policy Committee left the door wide open to a December cut.
“Today’s GDP numbers give the Bank every reason to walk through that door next month. With inflationary fears dissipating, its priority will be kickstarting the UK’s moribund growth - and a December rate cut now looks all but assured."
Lindsay James, investment strategist at Quilter, commented: "Today’s GDP release confirms what recent data has hinted at – the UK economy is struggling to maintain momentum as we head towards year-end. This paints a picture of an economy that started 2025 strongly but is now badly losing steam just as the Chancellor prepares for a pivotal Autumn Budget. Her next move will be critical if she is to recover Labour’s economic growth mission and prevent any whispers of a recession looming."
Scott Gardner, investment strategist at J.P. Morgan Personal Investing, added: “The UK economy is flatlining, with the latest data showing a more drastic slowdown than was expected. Slowing growth will further fuel calls for the Bank of England to cut rates at its December meeting to attempt to resuscitate the economy going into next year.
“All eyes will now be on the upcoming Budget with another weak GDP reading only adding to debates around which levers the Chancellor can pull to stimulate growth. In our view, boosting housing market activity is key to unlocking decent, sustained growth. This is especially important as recent uncertainty around potential changes to stamp duty and council tax has impacted overall sales and led to a softening in some parts of the market, like London. That said, with tax rises all but confirmed, consumption and, in turn, services spending could face more headwinds from the second quarter of next year when tax and spend measures could come into place. It remains all to play for.”
