The UK economy flatlined in July as the biggest contraction for a year in the manufacturing sector offset a bumper month on the high street.
The Office for National Statistics (ONS) said there was zero growth in gross domestic product (GDP) month on month in July, against 0.4% growth in June.
It came after the manufacturing sector saw activity pull back by 1.3% – the biggest contraction since July 2024.
This held back growth in the wider economy, with the services sector up 0.1% thanks to expansion of 0.6% for retail and construction growing 0.2%.
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.
“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.
“In the latest month GDP showed no growth, with increases in services and construction offset by falls in production.
“Falls in production were driven by broad-based weakness across manufacturing industries.”
Services output grew 0.4 per cent and construction by 0.6 per cent across the three months to July, contributing to an overall rise of 0.2 per cent for the economy across the summer period.
However, that means a third consecutive slowdown period as, in one expert’s words, the economy “grinds to a halt.” Lindsay James, investment strategist at Quilter, pointed out that even the areas which showed growth in the last three months are slowing – a direct consequence of the government raising costs for employers.
“After a positive first half of the year, UK economic growth is slowly grinding to a halt once again,” said Ms James.
“GDP failed to grow month-on-month in July, and slowed to just 0.2 per cent on a three-monthly basis. This increase was driven primarily by the services and construction sectors, but production output fell. However, growth is slowing in these sectors and is likely the result of actions taken by the Labour government now being realised, with the increase in employer national insurance contributions having a significant impact on business confidence.
“With the summer now over and the economy supposedly getting out of its slumber, we now face continuing uncertainty in the lead up to the budget in November given the precarious position the Chancellor finds the public finances in. It is estimated that the fiscal hole that needs to be plugged is anywhere between £20bn and £50bn. While that is a wide range, it means one thing for a government that has shown it will struggle to cut spending – more tax rises.”
Additional reporting by PA
