The UK economy recorded no growth in July, according to the Office for National Statistics, following a 0.4% expansion in June. The flat reading was broadly expected after a strong first half of the year.
Growth in services and construction was offset by a 0.9% decline in production, which includes manufacturing. The ONS said GDP rose by 0.2% in the three months to July compared with the previous three months, down from 0.3% in the three months to June.
Responding to the figures, a Treasury spokesperson said the economy was "not broken" but felt "stuck" due to years of underinvestment. Business groups have criticised the £25bn increase in employer national insurance contributions and the higher national living wage, both introduced in April, for restraining growth.
Stuart Morrison of the British Chambers of Commerce said the business landscape remained challenging, particularly for small and medium-sized enterprises, and urged the government to impose no further taxes on business in the autumn budget. Chancellor Rachel Reeves is widely expected to announce tax increases when she delivers her second budget on 26 November, amid expectations of downgraded forecasts from the Office for Budget Responsibility.
Economists warned that uncertainty over tax policy was likely to weigh on confidence. Fergus Jimenez-England of the National Institute of Economic and Social Research said fiscal uncertainty would constrain activity in the third quarter. The data revealed no growth alongside higher-than-expected inflation of 3.8% in July, leading investors to scale back expectations of interest rate cuts from the Bank of England, which is expected to hold rates at 4% next Thursday.
Separate trade figures showed the UK’s goods deficit widening by £3bn to £61.9bn in the three months to July. Exports to the US rose by £800m in July but remained below levels seen before Donald Trump’s tariffs were imposed.
