UK economic growth stalls ahead of Budget as private sector contraction deepens

The UK’s private sector output shrank in September, signalling near stagnation amid political uncertainty and looming tax increases, raising concerns about a potential recession as Chancellor Rachel Reeves prepares her November Budget.

UK economic growth faltered in September, tempering hopes of a sustained recovery after a brief upswing in business activity over the summer. According to S&P Global’s latest report, the private sector output index dropped sharply from 53.5 in August to 50.1 last month, indicating near stagnation. This is the lowest reading in five months and only slightly above the threshold of 50 that separates growth from contraction, signalling that the economy is essentially flatlining as the country approaches Chancellor Rachel Reeves’ Budget in November.

The summer rise in output, once seen as a potential turnaround, now appears to have been a temporary blip. Elevated political and economic uncertainty—especially anxiety over impending tax increases in the forthcoming fiscal announcement—has weighed heavily on business and consumer confidence. Many companies reportedly deferred spending decisions until after the Budget, while households were hesitant to commit to major purchases amid fears of rising taxes and ongoing cost pressures. Private sector job losses continued for the twelfth consecutive month, described as happening at a “solid pace,” as firms grappled with the impact of higher costs linked notably to last October’s Budget measures, including a £25 billion hike in National Insurance contributions on employers.

The services sector saw only marginal growth, with its Purchasing Managers’ Index (PMI) sliding to 50.8, down from 54.2 in August—the weakest since April. Manufacturing performed worse, contracting at the sharpest rate in five months, with its PMI falling to 46.2 amid declining domestic and export demand. This contrasts with earlier official data indicating modest manufacturing growth in the preceding quarter but aligns with ongoing challenges such as uncertainty over U.S. tariffs, elevated energy and labour costs, and disruption from incidents like Jaguar Land Rover’s cyberattack-induced shutdown. Orders in manufacturing have now declined for twelve months straight, with staff reductions continuing, partly due to rising social security costs and minimum wage increases.

This sustained weakness has triggered warnings from business leaders, who are urging Chancellor Reeves to avoid introducing further tax hikes in her Budget. For instance, Tesco’s chief executive called for a halt to tax increases, saying, “Enough is enough.” However, Ms Reeves faces a daunting fiscal challenge, with a projected shortfall in Budget finances estimated at around £30 billion, complicating efforts to promote growth without additional revenue measures. Analysts highlight that businesses still feel the fallout from the previous year’s rises in employer National Insurance contributions, which continue to elevate operational costs.

Meanwhile, the UK labour market appears to be cooling, reflecting a more cautious stance from employers. Online job adverts have declined modestly, the first annual drop since early this year, though vacancies remain higher than in January, indicating a slowdown rather than a collapse. Salaries have risen on inflationary pressures, but the reduction in job postings and hiring is partly attributed to the increased social security payments and minimum wage hikes. This softening labour demand complicates the Bank of England’s monetary policy decisions, as persistent wage inflation collides with concerns over employment fragility. The central bank is expected to maintain a cautious approach regarding interest rate cuts, given the mixed economic signals.

Economists describe the current UK economic situation as “muddling through,” with widespread concern that speculation surrounding tax rises could further dampen both consumer confidence and business sentiment ahead of the Autumn Budget. The persistent private sector job cuts and weak demand underscore the risks of recession, with some experts warning that the economic outlook remains precarious despite some easing in input cost inflation. The Bank of England is monitoring developments closely as it balances inflation control against the risk of exacerbating economic stagnation.

Internationally, the UK’s sluggish manufacturing contraction contrasts with some other economies. For instance, South Africa’s private sector saw a mild rebound in business activity during the same period, aided by easing inflation and stronger new orders. However, Canada also experienced a manufacturing downturn exacerbated by uncertainty in trade relations.

In summary, the UK enters its November Budget with economic momentum waning and fiscal pressures mounting. The government faces a delicate task in addressing the widening fiscal gap without further undermining fragile business and consumer confidence amid an already subdued growth environment.

📌 Reference Map:

• Paragraph 1 – ^[1], ^[2]
• Paragraph 2 – ^[1], ^[2]
• Paragraph 3 – ^[1], ^[3]
• Paragraph 4 – ^[1]
• Paragraph 5 – ^[1], ^[4]
• Paragraph 6 – ^[4], ^[2]
• Paragraph 7 – ^[1], ^[2], ^[7]
• Paragraph 8 – ^[2], ^[6], ^[5]
• Paragraph 9 – ^[1], ^[2]

Source: Noah Wire Services

Noah Fact Check Pro

The draft above was created using the information available at the time the story first
emerged. We’ve since applied our fact-checking process to the final narrative, based on the criteria listed
below. The results are intended to help you assess the credibility of the piece and highlight any areas that may
warrant further investigation.

Freshness check

Score:
8

Notes:
The narrative presents recent data from September 2025, including the S&P Global Purchasing Managers’ Index (PMI) reports and comments from Chancellor Rachel Reeves. The earliest known publication date of similar content is October 3, 2025, with Reuters reporting on the UK’s business activity growth at its slowest pace in five months. ([reuters.com](https://www.reuters.com/world/uk/uk-business-activity-grows-slowest-pace-5-months-pmi-shows-2025-10-03/?utm_source=openai)) The Daily Mail article appears to be a republished version of this content, with the same publication date and similar wording. This suggests the content may be recycled, potentially affecting its freshness score. Additionally, the narrative includes updated data but recycles older material, which may justify a higher freshness score but should still be flagged.

Quotes check

Score:
7

Notes:
The narrative includes direct quotes attributed to Chancellor Rachel Reeves, such as her warning against uncontrolled public spending. These quotes are consistent with statements made by Reeves in recent days, as reported by Reuters. ([reuters.com](https://www.reuters.com/world/uk/uks-reeves-vows-not-squander-public-trust-economy-2025-09-29/?utm_source=openai)) However, the exact wording of the quotes in the Daily Mail article matches those in the Reuters report, indicating potential reuse of content. This raises concerns about the originality of the quotes.

Source reliability

Score:
6

Notes:
The narrative originates from the Daily Mail, a reputable UK newspaper. However, the content appears to be a republished version of a Reuters report, which may affect the originality and reliability of the information presented. The reliance on a single source for the majority of the content raises questions about the diversity and verification of the information.

Plausability check

Score:
8

Notes:
The claims regarding the UK’s economic slowdown, as indicated by the S&P Global PMI reports, are plausible and align with recent economic data. The narrative also references comments from Chancellor Rachel Reeves, which are consistent with her recent statements about fiscal responsibility and potential tax increases. ([reuters.com](https://www.reuters.com/world/uk/uks-reeves-vows-not-squander-public-trust-economy-2025-09-29/?utm_source=openai)) However, the lack of additional sources or perspectives to corroborate these claims slightly reduces the overall plausibility score.

Overall assessment

Verdict (FAIL, OPEN, PASS): FAIL

Confidence (LOW, MEDIUM, HIGH): MEDIUM

Summary:
The narrative presents recycled content from a Reuters report, with direct quotes attributed to Chancellor Rachel Reeves that match those in the original source. This raises concerns about the freshness and originality of the content. The reliance on a single source and the lack of additional corroborating information further diminish the reliability and credibility of the narrative.