The UK economy recorded zero growth in July, according to official figures from the Office for National Statistics (ONS), a slowdown from 0.4% growth in June. The services and construction sectors expanded, but a 0.9% decline in production, including manufacturing, offset these gains.
The flatlining comes after strong growth in the first half of the year, which made the UK the fastest-growing G7 economy. However, the slowdown was widely anticipated and raises questions about Labour’s promise to boost economic growth.
A Treasury spokesperson said the government acknowledges that “our economy isn’t broken, it does feel stuck” due to years of underinvestment, adding that ministers are determined to reverse this. The ONS noted that GDP grew by 0.2% in the three months to July, down from 0.3% in the three months to June, with three-month figures considered a more reliable indicator of underlying health.
Business groups have blamed the £25bn increase in employer national insurance contributions and a rise in the national living wage for constraining growth. The British Chambers of Commerce urged the government not to impose further taxes on business in the autumn budget, stating that cost pressures are impacting investment, recruitment and trade.
Economists warned that speculation about tax increases continues to weigh on confidence. The Liberal Democrats criticised the government’s “growth-crushing jobs tax” and its refusal to cut red tape with Europe, arguing this holds back exporters.
Trade data published alongside the GDP figures showed the UK’s goods deficit widened by £3bn to £61.9bn in the three months to July. Higher-than-expected inflation of 3.8% in July has also reduced expectations of further interest rate cuts from the Bank of England.
