The UK economy recorded zero growth in July, according to official figures, ending a run of expansion that had made Britain the fastest-growing economy in the G7. The stagnation follows June's 0.4% rise and comes as Chancellor Rachel Reeves prepares for a challenging autumn budget.
The Office for National Statistics said growth in services and construction was offset by a 0.9% fall in production, which includes manufacturing. GDP grew by 0.2% in the three months to July, down from 0.3% in the previous quarter, with statisticians viewing three-month figures as a more reliable indicator of underlying performance.
Liz McKeown, ONS director of economic statistics, said: “Growth in the economy as a whole continued to slow over the last three months. While services growth held up, production fell back further.” She added that health, computer programming and office support services had performed well, while manufacturing experienced broad-based weakness.
A Treasury spokesperson acknowledged the need for improvement, stating: “We know there’s more to do to boost growth, because, whilst our economy isn’t broken, it does feel stuck.” Business groups pointed to the £25bn increase in employer national insurance contributions and the higher national living wage as factors constraining growth. The British Chambers of Commerce warned against further tax rises, with research manager Stuart Morrison saying: “There must be no more taxes on business in the autumn budget.”
Economists cautioned that fiscal uncertainty would continue to weigh on confidence. Fergus Jimenez-England of the National Institute of Economic and Social Research said: “Growth at this pace will do little to ease the fiscal challenges confronting the chancellor this autumn.” The pound weakened 0.2% against the dollar to $1.355 after the data.
Other figures published alongside the GDP update showed the goods trade deficit widening by £3bn to £61.9bn in the three months to July, while exports to the US remained below pre-tariff levels. Inflation rose to 3.8% in July, leading investors to scale back expectations of interest rate cuts, with the Bank of England widely expected to hold rates at 4% at its next meeting.
