- UK economy stagnated in July, missing growth forecast
- Services grew, but production and construction fell
- New Labour government faces economic growth challenges
According to official figures, the UK unexpectedly failed to grow in July after flatlining in June.
Analysts expected 0.2% growth in July.
A summer of sporting events, including the Euros and the Olympics, boosted the services sector, but production and construction output decreased.
Another month without growth challenges the incoming Labour government, which has prioritized economic growth.
Despite the absence of an increase in July, Liz McKeown, director of economic statistics at the Office for National Statistics (ONS), stated that “longer-term strength in the services sector meant there was growth over the last three months as a whole.”
Computer programmers and the health sector, which returned after a June strike, led the way in service growth. However, according to Ms McKeown, output in advertising, architecture, and engineering decreased.
She added that it was an “abysmal” month for auto and machinery companies.
The ONS measures GDP (gross domestic product) every month, but the three-month trend is more important.
Monthly figures are an early estimate frequently altered significantly when more data becomes available.
At the end of last year, the UK entered a slight recession, with the economy failing to develop for two consecutive three-month periods. However, the first half of 2024 saw a return to modest growth.
The new government, which took power at the beginning of July, has stated that it aims to make the UK the fastest-growing economy in the G7.
Chancellor Rachel Reeves stated that she was “under no illusion” about the magnitude of the challenge but would “be honest with the British people that change will not happen overnight.
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Lower growth also implies lower tax revenue, leaving the government less room to maneuver in the October budget.
The economy stagnated in July… but this does not mean the UK is on the verge of another recession,” said Ruth Gregory of Capital Economics.
And we can take solace in the fact that service production increased by 0.1% monthly.
We’ve had a terrific summer.
The ONS reported that merchants and hospitality venues saw an increase in business in July as the England men’s football team advanced through the European championships.
Gillian Fletcher, general manager of Spinningfields, which operates food and drink venues in Manchester, said they aired the Euros, Wimbledon, and Olympics this summer and discovered customers were “in the market” for that type of experience.
“It is not because people are unwilling to spend money or go out. “It’s just the economic landscape has shifted,” she explained.
We’ve had a good year and summer, proving that if you have the correct recipe, people will come.
However, some eateries informed the ONS that the football tournament had a detrimental impact on footfall.
