The UK economy recorded zero growth in July, according to official figures from the Office for National Statistics (ONS), marking a sharp slowdown from the 0.4% expansion seen in June. The data presents a challenge for Chancellor Rachel Reeves as she prepares for the autumn budget on 26 November.
The ONS reported that growth in the services and construction sectors was offset by a 0.9% decline in production, particularly in manufacturing. Over the three months to July, GDP grew by 0.2%, down from 0.3% in the three months to June. ONS director of economic statistics Liz McKeown noted that while services held up, production fell further, driven by broad-based weakness across manufacturing industries.
The flatlining economy follows a strong first half of the year, which saw the UK become the fastest-growing economy in the G7. However, the slowdown was widely anticipated. Business groups have blamed the £25bn increase in employer national insurance contributions and the rise in the national living wage, both introduced in April, for constraining growth. The British Chambers of Commerce urged the government to avoid further tax increases on business.
The pound weakened by 0.2% against the US dollar following the news, trading at $1.355. Economists warned that fiscal uncertainty ahead of the budget continues to weigh on confidence. The Liberal Democrats accused the government of leaving the 'handbrake on' growth, citing the jobs tax and failure to cut red tape with Europe.
Trade data also showed the UK's goods deficit widening by £3bn to £61.9bn in the three months to July, with exports to the US rising but not returning to pre-tariff levels. The slowdown comes alongside higher-than-expected inflation at 3.8% in July, reducing expectations of further interest rate cuts from the Bank of England, which is expected to hold rates at 4% next week.
