UK GDP flat in July
Newsflash: UK economic growth ground to a halt in July.
GDP was unchanged in July, new data from the Office for National Statistics, just released, show.
Although that’s in line with City forecasts, it must be disappointing news for chancellor Rachel Reeves as she prepares the Autumn budget.
It means the economy slowed to a halt, compared with June when the economy grew by 0.4%, according to the ONS.
The stats body reports:
Services and construction both grew in July 2025, growing by 0.1% and 0.2% respectively, while production fell by 0.9% in July.
Key events
Pound weakens after GDP report
The pound has weakened since today’s GDP report showed the UK economy failed to grow in July.
Sterling is down 0.2% at $1.355 against the US dollar this morning.
Kathleen Brooks, research director at XTB, points out there is “not much to like” from the July monthly GDP update, with zero growth in the economy at the start of the third quarter.
If the third quarter is not going to be a disaster for the UK economy, then growth in August and September will need to do the heavy lifting.
The pound is extending losses on this news and is eroding some of Thursday’s gains. For now, GBP/USD is hanging on to $1.3550, however, if bond yields start to rise on the back of this data, then we could see pound weakness later on Friday. The pound is the third worst performer in the G10 FX space so far today.
Treasury: UK economy ‘does feel stuck’
The government is blaming “years of underinvestment” for the fact the UK economy feels like it is “stuck”.
Responding to this morning’s news that the economy stagnated in July, a HM Treasury spokesperson says:
“We know there’s more to do to boost growth, because, whilst our economy isn’t broken, it does feel stuck.
“That’s the result of years of underinvestment, which we’re determined to reverse through our Plan for Change. We’re making progress: growth this year was the fastest in the G7; since the election, interest rates have been cut five times, and real wages have risen faster than they did under the last government.
“There’s more to do to build an economy that works for, and rewards, working people. That’s why we are cutting unnecessary red tape, transforming the planning system to get Britain building, and investing billions of pounds into affordable homes, Sizewell C, and local transport across the country.”
“Stuck” appears to be Word of the Week in the Treasury. Yesterday, chancellor Rachel Reeves insisted the UK economy is “stuck, not broken”.
[which reminds me of Captain Blackadder’s line: We’re in the stickiest situation since Sticky the stick insect got stuck on a sticky bun….]
CBI: speculation about new business taxes is slowing growth
The CBI says uncertainty about the upcoming budget is hurting the economy too.
Ben Jones, CBI lead economist, says:
“The sunshine may have lifted consumers in July, but the broader economy stayed stuck in the shade. Growth was uneven across sectors, highlighting that underlying demand remains more fragile.
“Speculation about new business taxes is casting a long shadow. Amid rising cost pressures, firms are already holding back on hiring and investment and are wary of weeks more Budget uncertainty.
“The government cannot tax its way to growth and continue to raid corporate coffers. With the Autumn Budget fast approaching, the Chancellor must deliver a decisive, pro-growth package by committing to serious tax reform. It’s the structure of our system – from punitive business rates to the restrictive VAT threshold and stamp duty – that holds back economic progress, not just the rates themselves.”
Quilter: growth slowing due to Labour’s NICs increase
Rachel Reeves’s tax rises in last year’s budget are hitting the economy, argues Lindsay James, investment strategist at financial services firm Quilter.
James cites the increase in the national insurance rates paid by employers, saying:
“After a positive first half of the year, UK economic growth is slowly grinding to a halt once again, with GDP failing to grow month-on-month in July, and slowing to just 0.2% on a three-monthly basis. This increase was driven primarily by the services and construction sectors, but production output fell by 1.3%. However, growth is slowing in these sectors and is likely the result of actions taken by the Labour government now being realised, with the increase in employer national insurance contributions having a significant impact on business confidence.
“With the summer now over and the economy supposedly getting out of its slumber, we now face continuing uncertainty in the lead up to the budget in November given the precarious position the Chancellor finds the public finances in. It is estimated that the fiscal hole that needs to be plugged is anywhere between £20bn and £50bn. While that is a wide range, it means one thing for a government that has shown it will struggle to cut spending – more tax rises.
“Speculation is already rife about which taxes will be raised, and without the ability to raise the main revenue generators – income tax, national insurance and VAT – the government is left with targeting multiple sectors for small amounts of revenue. This is increasing the headwinds for the UK economy and with still over two months to go, GDP readings for the second half of the year are unlikely to pretty reading. For government under as much pressure as it is at the moment, this will be a very difficult corner to get itself out of.”
Chart: three monthly GDP growth slowed again in July
Here’s a chart showing how growth has slowed, when looking at GDP over a three-month period:
ONS: production sector is falling back
ONS director of economic statistics Liz McKeown says:
“Growth in the economy as a whole continued to slow over the last three months. While services growth held up, production fell back further.
“Within services, health, computer programming and office support services all performed well, while the falls in production were driven by broad based weakness across manufacturing industries.
“In the latest month GDP showed no growth, with increases in services and construction offset by falls in production.”
Growth slowed to 0.2% over last three months
Today’s GDP report also shows that the UK economy grew by 0.2% in the three months to July 2025 compared with the three months to April 2025.
That’s a better measure than the rather volatile month-on-month changes to GDP.
That also shows the economy slowed, after recording three-month-on-three-month growth of 0.3% in June 2025 and 0.6% in May 2025.
UK GDP flat in July
Newsflash: UK economic growth ground to a halt in July.
GDP was unchanged in July, new data from the Office for National Statistics, just released, show.
Although that’s in line with City forecasts, it must be disappointing news for chancellor Rachel Reeves as she prepares the Autumn budget.
It means the economy slowed to a halt, compared with June when the economy grew by 0.4%, according to the ONS.
The stats body reports:
Services and construction both grew in July 2025, growing by 0.1% and 0.2% respectively, while production fell by 0.9% in July.
While we wait for the UK report….some of Britain’s biggest retailers are warning this morning that 400 large-format stores could close if the government forces large shops into its proposed higher business rates tax band.
The British Retail Consortium has calculated that there are 4,000 large-format retail stores with a rateable value of over £500,000, and estimated that one in 10 could be shut if they face higher business rates.
The BRC says:
The retail industry accounts for 5% of the economy yet pays over 20% of all business rates bills. This load is keenly felt by large stores (those with a rateable value of over £500,000), which pay around a third of retail’s total business rates bill.
Given the small profit margins that exist across retail (around 2-4% for food), a significant rise in rates for large stores would force these shops to raise their prices, employ fewer people, or even close their doors entirely.
Introduction: UK July GDP report coming up
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
Today we’ll learn how Britain’s economy fared at the height of the summer, when the first estimate of UK GDP in July is released in around 30 minutes, at 7am.
Economists predict that growth slowed, or worse, during July. The consensus forecast is that GDP was unchanged during in the month, a slowdown compared to June when the economy expanded by 0.4%.
City forecasts range from growth of 0.2% to a 0.2% fall in GDP during the month.
Thomas Pugh, chief economist at audit, tax and consulting firm RSM UK is in the growth camp, explaining:
Overall, the domestic economy is in better shape than it perhaps feels to businesses and consumers but this discrepancy in perception vs reality, or ‘vibecession’, is slowing growth; and we expect Friday’s GDP to show that the economy grew by 0.1% m/m in July despite some headwinds from NHS strikes and a weak construction sector.
The upshot is that behind the headlines, July’s GDP data is likely to show that the economy continued to recover over the summer after April’s barrage of taxes and tariffs.
But…. Deutsche Bank’s chief economist, Sanjay Raja, expects a small reversal in GDP in July:
After a surprisingly stronger Q2-25, where the UK claimed the fastest growth rate among G7 economies, all signs point to a slowdown in economic activity in the second half of the year. A course correction in trade-fronting, stockpiling, net acquisitions of precious metals, and public sector spending, we think, will see UK GDP growth slow into H2-25.
What do we expect in July? Our nowcast models point to a 0.1% m-o-m contraction to start the summer – though we see some upside risks given the timing of the Euro finals. Overall, however, we see all three key sectors in the UK declining.
The agenda
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7am BST: UK GDP report for July
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7am BST: UK trade report for July
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11.30am BST: Russia interest rate decision
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3pm: US consumer confidence survey from the University of Michigan
