The UK economy flatlined in July, with GDP growth stuck at 0 per cent as a sharp contraction in manufacturing weighed on activity at the start of the third quarter.
Official figures from the Office for National Statistics (ONS) showed output falling short of the 0.1 per cent growth economists had forecast, underlining the fragile nature of Britain’s recovery.
The ONS said the economy grew by 0.2 per cent on a rolling three-month basis, a measure it will now prioritise to provide a clearer picture of performance given the volatility of monthly data. July’s weakness was driven by a 0.9 per cent fall in production, including a 1.3 per cent decline in manufacturing, pushing industrial output to its lowest level since January.
Services, which make up nearly three-quarters of UK GDP, edged higher by 0.1 per cent, while construction posted a 0.2 per cent gain, helping to soften the blow. The health sector also contributed positively, with output rising 0.6 per cent as NHS strikes had less impact than in earlier months.
The figures come after stronger-than-expected growth in the first two quarters of the year, but analysts warn momentum is fading as higher interest rates, stubborn inflation and weaker global demand weigh on prospects. Economists expect GDP to expand by just 0.2 to 0.3 per cent in the third quarter—broadly in line with forecasts from the Bank of England and the Office for Budget Responsibility.
Chancellor Rachel Reeves faces mounting pressure to boost growth ahead of November’s budget, though economists stress the latest data does not materially alter the government’s fiscal headroom. Treasury officials acknowledged the economy “feels stuck” after years of underinvestment, but pointed to progress on wages, interest rates and G7-leading growth earlier this year.
Sterling slipped against both the dollar and euro following the release, while gilt yields ticked higher and UK equities traded mixed in early London trading.
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UK economy stalls in July as manufacturing slowdown drags on growth