The UK economy has stagnated for the second consecutive month, with no growth recorded in July according to the Office for National Statistics (ONS). This economic flatline comes as a significant challenge to the new Labour government, which had prioritized economic growth as a key policy objective.Despite economists’ predictions of a slight increase of 0.2%, the Gross Domestic Product (GDP) remained unchanged. The services sector showed a minimal growth of 0.1%, but this was offset by declines in manufacturing (0.8%) and construction (0.4%). Liz McKeown, ONS director of economic statistics, noted, “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”.Finance Minister Rachel Reeves acknowledged the scale of the challenge, stating, “I am under no illusion about the scale of the challenge we face and I will be honest with the British people that change will not happen overnight”. The stagnation follows a period of slow recovery after the UK entered a technical recession in late 2023.Despite the gloomy outlook, there are some positive indicators. The government received a boost from Amazon Web Services’ announcement of an £8 billion investment in Britain over the next five years, potentially contributing £14 billion to the country’s GDP. Additionally, the economy showed growth of 0.5% in the three months to July, primarily driven by the services sector.The Bank of England, which recently lowered interest rates for the first time in over four years from 5.25% to 5% in early August, will be closely monitoring these economic indicators. Market expectations suggest that interest rates may remain unchanged in the near term, with a potential cut to 4.75% anticipated in November.As the UK grapples with these economic challenges, the government’s ability to stimulate growth and navigate the complex global economic landscape will be crucial in the coming months.
Key points
- UK economy showed no growth in July, the second consecutive month of stagnation.
- Finance Minister Rachel Reeves acknowledged the challenge, emphasizing that economic change will take time.
- Despite overall stagnation, the services sector showed slight growth, while manufacturing and construction declined.
- Amazon’s announced £8 billion investment over five years provides a positive outlook amidst economic challenges.
Contradictions👾While most sources report July as the second consecutive month of no growth, one source mentions May instead of June as the previous month of stagnation.
