The UK economic system “continued to sluggish” and recorded zero development in July, in line with official figures displaying a giant drag from producers.
The information from the Workplace for Nationwide Statistics (ONS) adopted a determine of 0.4% development the earlier month and damaging development of 0.1% in Could.
Output of 0.3% was achieved over the April-June quarter as an entire, slowing from the 0.7% recorded over the primary three months of 2025.
Cash newest: Reaction as economy slows
The most recent figures sign concern for the months forward because the labour market slows and the consequences of elevated inflation and the US commerce struggle dampen demand.
Commenting on July’s exercise, ONS director of financial statistics Liz McKeown stated that declines in manufacturing offset meagre development in companies and development.
“Development within the economy as an entire continued to sluggish during the last three months”, she stated.
“Whereas companies development held up, manufacturing fell again additional.
“Inside companies, well being, pc programming and workplace assist companies all carried out effectively, whereas the falls in manufacturing had been pushed by broad based mostly weak spot throughout manufacturing industries.”
The Labour authorities made rising the economic system its precedence when taking workplace final summer season however the chancellor admitted this week that it had turn out to be “caught”.
The US commerce struggle has proved a drag on exercise globally this 12 months however Rachel Reeves has additionally been accused of making use of the brakes herself by plundering the non-public sector for money since taking workplace, harming funding and employment within the course of.
Employers reacted to a £40bn finances tax raid by reducing jobs and passing on rising prices to prospects.
Tax rises enjoying ’50:50′ function in rising inflation
Inflation is presently working at virtually double the Bank of England‘s 2% goal, harming the prospects for future rate of interest cuts.
Financial institution knowledge out final week recommended employers had been reducing jobs on the fastest pace since 2021.
Consideration is popping swiftly to the subsequent finances, due on 26 November, and nerves over what measures are to return are hampering sentiment.
Ms Reeves is below strain to lift extra taxes to fill a black gap within the public funds estimated to be between £30-£40bn.
UK debt turn out to be costlier
The chancellor has once more dominated out elevating earnings tax, worker nationwide insurance coverage contributions and VAT, which, she has at all times acknowledged, would trigger direct hurt to “working folks”.
Potential targets embody the rich. Banks additionally concern a raid on their earnings.
However the chief govt of the CBI enterprise foyer group advised The Guardian newspaper earlier this week that Ms Reeves ought to now break her promise to not goal employees.
Is Labour plotting a ‘wealth tax’?
Rain Newton-Smith argued that new tax rises on companies would quantity to an extra choke on development and employment, harming working folks not directly within the course of.
The CBI desires to see reforms to enterprise charges and cuts to VAT thresholds, amongst different issues, because the non-public sector shoulders its bigger tax burden.
“The world is completely different from when Labour drafted its manifesto, and when the details change so ought to the options,” Ms Newton-Smith added.
The chancellor has responded with plans to ease some boundaries to enterprise as a part of efforts to enhance development.
The Treasury is contemplating an overhaul of small enterprise charges reduction guidelines to finish a so-called “cliff edge” penalty going through companies opening a second premises.
The British Retail Consortium warned individually on Friday that 400 of the nation’s largest shops might shut if such premises fall right into a proposed increased enterprise charges band.
It argued that they had been already below vital strain from hovering employment and tax prices, which had accounted for the closure of 1,000 such areas over the previous 5 years.
Commenting on the ONS knowledge, a spokesperson for the Treasury stated: “We all know there’s extra to do to spice up development, as a result of, while our economic system is not damaged, it does really feel caught.
“That is the results of years of underinvestment, which we’re decided to reverse by means of our Plan for Change.
“We’re making progress: development this 12 months was the quickest within the G7; because the election, rates of interest have been reduce 5 instances, and actual wages have risen sooner than they did below the final authorities.
“There’s extra to do to construct an economic system that works for, and rewards, working folks. That is why we’re reducing pointless crimson tape, reworking the planning system to get Britain constructing, and investing billions of kilos into reasonably priced properties, Sizewell C, and native transport throughout the nation.”
Shadow chancellor Mel Stride responded: “Whereas the federal government lurch from one scandal to a different, borrowing prices not too long ago hit a 27-year excessive – a damning vote of no confidence in Labour that makes painful tax rises all however sure.
“It’s little marvel that Starmer has stripped Reeves of management over the finances. However sidelining her isn’t sufficient – he should additionally reject her failed financial strategy that has left Britain poorer.”
