The UK economy showed no growth in July, marking the second consecutive month of stagnation, according to flash figures released by the Office for National Statistics (ONS) on Wednesday. Economists had predicted a 0.2% growth for the month, but the actual gross domestic product (GDP) remained flat, following a similar reading in June.
The UK’s dominant services sector recorded marginal growth of 0.1% in July, while output from the production and construction sectors declined by 0.8% and 0.4%, respectively. Over the three months leading to July, the economy grew by 0.5%, slightly below the 0.6% growth observed in the second quarter of 2023.
Liz McKeown, Director of Economic Statistics at the ONS, noted, “The economy recorded no growth for the second month running, though longer-term strength in the services sector meant there was growth over the last three months as a whole.”
While the UK had experienced steady economic expansion in the earlier months of the year, emerging from a mild recession in early 2023, the recent readings highlight ongoing challenges. The July data marks the first economic figures under Prime Minister Keir Starmer’s new Labour government, which took office on July 4. Finance Minister Rachel Reeves acknowledged the difficulties ahead, stating, “I will be honest with the British people that change will not happen overnight. Two quarters of positive economic growth does not make up for fourteen years of stagnation.”
Reeves is set to present her first Autumn Statement on October 30, where she will outline the government’s budget for the coming year. She has warned of a “painful” financial outlook, citing an inherited £22 billion ($29 billion) deficit from the previous Conservative government. Her predecessor, Jeremy Hunt, has disputed this, dismissing the claims as “fiction.”
Lindsay James, investment strategist at Quilter Investors, warned that the prospect of potential tax hikes in the upcoming budget could dampen consumer spending. However, she noted that further interest rate cuts from the Bank of England, expected over the coming year, may help alleviate growth pressures.
“This month may just be a blip, given recent positive signals about the broader economy,” James concluded.
