UK in crisis as economy stagnates yet again during Labour’s first month

The news would come as a huge blow to Sir Keir Starmer barely two months on from his General Election victory.

The UK economy flatlined in July for the second month in a row, according to the latest official figures, in a significant setback from Chancellor Rachel Reeves and recently installed Prime Minister Sir Keir Starmer.

The Office for National Statistics (ONS) said gross domestic product (GDP) recorded no growth in July.

Economists had been expecting GDP to edge up by 0.1 percent in the month, according to a consensus provided by Pantheon Macroeconomics.

The latest data comes after the economy continued its recovery from recession at the end of last year, with growth of 0.6 percent between April and June.

ONS director of economic statistics Liz McKeown said: “The economy recorded no growth for the second month running, though longer term strength in the services sector meant there was growth over the last three months as a whole.

“July’s monthly services growth was led by computer programmers and health, which recovered from strike action in June.

“These gains were partially offset by falls for advertising companies, architects and engineers.

“Manufacturing fell, overall, with a particularly poor month for car and machinery firms, while construction also declined.”

Commenting, Sam Kirk, Managing Director at J-Flex Rubber Products commented: “All eyes in the economy are very much on the forthcoming Budget.

“Visibility, or rather the lack of it, is currently a major challenge for many SMEs throughout the supply chain, with some reluctant to press ahead with plans until there is clarity after the Autumn Budget.

“Businesses will be nervously waiting to hear whether Labour announce further tax hikes or increased borrowing, which, if true, will only add to inflationary pressures and undermine business confidence.

“I truly hope Labour can deliver a Budget that both revitalises the economy and reassures sceptics like me. I fear that may be too much to ask, and that we’ll just be left with even more uncertainty.”

Posting on X, Julian Jessop, Economics Fellow at the Institute of Economic Affairs, said: “Surprisingly weak UK #GDP data for July – no growth for the second month running…

“Monthly data can be erratic – the less volatile 3m/3m measure still rose 0.5 percent – but the poor July numbers are hard to square with the positive tone of the business and consumer surveys.”

Riz Malik, Independent Financial Adviser at R3 Wealth suggested the case for an interest rate cut had been bolstered.

He said: “No growth Britain could put Britain into recession very quickly.

“Is this enough for a September rate cut?

“Unlikely, but it adds weight to further rate cuts before the year is out.”

Isaac Stell, Investment Manager, Wealth Club, said: “The month-on-month GDP figures missed all estimates producing a fairly dismal set of numbers with the services sector managing to mitigate the declines seen in the construction and manufacturing sectors.

“A reversal in the fortunes for the manufacturing and construction sectors is a blow to the new Labour Government that has growth as a central pillar of its agenda.

“The usual bright spot was the bounce back in growth for the services sector with the health sector one of the leading contributors, springing back to life following strike action in June.

“A notable slowdown in advertising and architects may be indicative of a wider slowdown.

“With the canaries beginning to look a bit peaky, the chancellor may need to tread more carefully in October.”