The UK economy recorded zero growth in July, according to official data, presenting a difficult backdrop for Chancellor Rachel Reeves ahead of her upcoming fiscal announcement. n nThe Office for National Statistics reported that while the economy expanded by 0.4% in June, July saw no expansion. Growth in services and construction was counterbalanced by a 0.9% contraction in the production sector, which includes manufacturing. n nAlthough the UK led the G7 in economic expansion during the first half of the year, analysts anticipated a slowdown in the latter months. The three-month growth rate to July stood at 0.2%, down from 0.3% in the previous quarter. Experts consider quarterly figures more reliable than monthly data due to reduced volatility. n nLiz McKeown, the ONS director of economic statistics, noted that while service industries such as healthcare, IT programming, and administrative support performed well, manufacturing continued to weaken broadly. n nThe release of the figures coincided with a slight depreciation in the pound, which fell 0.2% to $1.355 against the US dollar. Business organizations have pointed to April’s £25bn rise in employer national insurance contributions and higher minimum wage rates as factors dampening investment and hiring, particularly among small and medium-sized enterprises. n nStuart Morrison, research manager at the British Chambers of Commerce, urged the government to refrain from additional business taxation in the autumn budget, warning that firms are already under significant cost pressure. n nEconomists suggest that the chancellor may still need to propose tax increases in her 26 November budget, especially if economic forecasts from the Office for Budget Responsibility are revised downward. However, Fergus Jimenez-England of the National Institute of Economic and Social Research cautioned that uncertainty over fiscal policy could suppress consumer and corporate confidence, limiting economic momentum. n nTrade figures released alongside GDP data revealed a widening goods deficit, reaching £61.9bn over the three months to July—an increase of £3bn. While exports to the US rose by £800m in July, they remain below pre-Trump tariff levels. n nCompounding the challenge, inflation rose to 3.8% in July, reducing expectations of near-term interest rate cuts by the Bank of England. Its monetary policy committee is expected to maintain rates at 4% in its upcoming meeting. n nUpcoming employment and inflation reports will offer further insight into economic conditions, though officials have acknowledged ongoing issues with data accuracy at the ONS. n— news from The Guardian
— News Original —
UK economy flatlines in July in grim news for Rachel Reeves
The UK economy flatlined in July, according to official figures, in grim news for Rachel Reeves as she gears up for a challenging budget. n nIt was a slowdown compared with June, when the economy grew by 0.4%, according to the Office for National Statistics. n nGDP expanded strongly in the first half of the year, making the UK the fastest-growing economy in the G7, but it had been widely expected to slow in the second half. n nThe ONS said that growth in the services and construction sectors in July was offset by a 0.9% fall in the production sector, which includes manufacturing. n nThe downbeat data will raise questions about Labour’s promise to kickstart the economy. n nA Treasury spokesperson said: “We know there’s more to do to boost growth, because, whilst our economy isn’t broken, it does feel stuck. That’s the result of years of underinvestment, which we’re determined to reverse through our plan for change.” n nThe ONS said that GDP grew by 0.2% in the three months to July, compared with the three months to April, down from 0.3% in the three months to June. Statisticians see three-month figures as a better guide to the underlying health of the economy than one-month data, which tends to be more volatile. n nThe ONS director of economic statistics, Liz McKeown, 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. n n“Within services, health, computer programming and office support services all performed well, while the falls in production were driven by broad-based weakness across manufacturing industries.” n nThe pound weakened after the news, to trade 0.2% lower at $1.355 against the US dollar by mid-morning in London. n nBusiness groups have blamed Reeves’s £25bn increase in employer national insurance contribution, which came into force in April alongside a significant rise in the national living wage, for constraining growth. n nThe British Chambers of Commerce (BCC) responded to the data by warning Reeves against levying more taxes on business. n nStuart Morrison, the BCC’s research manager, said: “The business landscape remains challenging, particularly for SMEs [small and medium-size enterprises], with cost pressures impacting investment, recruitment and trade. n n“The government has acknowledged it has asked a lot of business in the past year. Our message is now clear – there must be no more taxes on business in the autumn budget.” n nThe chancellor is widely expected to have to present a package of tax increases when she delivers her second budget on 26 November, to compensate for an anticipated downgrade in the Office for Budget Responsibility’s forecasts. n nHowever, after the news of zero growth in July, economists warned that speculation about tax increases was likely to continue weighing on confidence. n nFergus Jimenez-England, an associate economist at the National Institute of Economic and Social Research, said: “Economic activity in the third quarter will be constrained by fiscal uncertainty weighing on household and business sentiments. Growth at this pace will do little to ease the fiscal challenges confronting the chancellor this autumn.” n nDaisy Cooper, the Liberal Democrats’ Treasury spokesperson, said: “The government talks of going full-throttle on growth but the reality is they have left the handbrake on. n n“Their growth-crushing jobs tax risks hollowing out our high streets and ministers’ refusal to jettison their shortsighted red lines on cutting red tape with Europe is holding back our exporters.” n nTrade data published alongside the GDP update showed the UK’s goods deficit widening by £3bn in the three months to July, to £61.9bn. The ONS said exports to the US rose by £800m in July but had not returned to the levels seen before Donald Trump’s tariffs were imposed. n nThe slowdown in economic growth comes alongside higher-than-expected inflation, which jumped to 3.8% in July, prompting investors to rein in expectations of further interest rate cuts from the Bank of England in the coming months. n nThe Bank’s nine-member monetary policy committee is expected to leave rates on hold at 4% when it meets next Thursday. n nJobs and inflation data, due to be published earlier in the week, will give more detail of the state of the economy – though policymakers have repeatedly warned that known flaws in ONS data are making it difficult to get a clear picture.