Economy flatlines as UK sees no growth for second month in a row

Chancellor Rachel Reeves said she is under no illusion about the scale of the challenge for Labour

Chancellor Rachel Reeves (PA Wire)

The UK’s economy saw a second month of stagnation in July, also recording no growth in June, the Office for National Statistics has said.

Gross Domestic Product (GDP), which is the measure of the value of goods and services, is shown to have flatlined for the month.

The figures are the first for the period since Sir Keir Starmer’s Labour power after the 4 July general election.

Chancellor Rachel Reeves said: “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.

“Two quarters of positive economic growth does not make up for fourteen years of stagnation.

“That is why we are taking the long-term decisions now to fix the foundations of our economy.”

Economists had been expecting GDP to edge up by 0.1 per cent in July, 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.

The ONS’s data showed that the services sector increased by 0.1 per cent in July but by 0.6 per cent across the three months to July.

The accommodation and food and beverages category ticked up by 0.9 per cent, with accommodation, including hotels, the biggest contributor with 2.2% growth recorded during the month.

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.”

Rob Wood, chief UK economist for Pantheon Macroeconomics, said GDP was “dragged down by erratic sectors” and that he is expecting a “substantial rebound” in economic growth in August, as manufacturing and construction recover.

He also said consumer spending could “keep rising as the prospect of interest rate cuts and a more political and a more stable political and economic environment allow households to lower their saving rate” during the second half of 2024.