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The UK economy stagnated in July, underlining the challenge facing the government ahead of a high-stakes November Budget.
Friday’s figure from the Office for National Statistics was in line with economists’ expectations and followed a 0.4 per cent expansion in June.
A slump in manufacturing in July offset increases in the services and construction sectors, the ONS said.
Chancellor Rachel Reeves has made economic growth her “number one mission”, but momentum has faltered in recent months. After a 0.7 per cent expansion in the first quarter — driven in part by a surge in exports to the US ahead of Donald Trump’s tariffs — GDP growth slowed to 0.3 per cent in the three months to June.
The latest figure means growth slowed to 0.2 per cent in the three months to July compared with the previous three months.
In a sign of the pressure on the government to boost the economy, Prime Minister Sir Keir Starmer this week announced a new “Budget board” to align growth initiatives across Number 10 and the Treasury in the run-up to the Budget on November 26.
But economists also predict Reeves will be forced to increase taxes in the Budget, with some estimating the government will have to raise more than £20bn to fill a fiscal hole.
Responding to the figures, a Treasury spokesperson said: “We know there’s more to do to boost growth, because, whilst our economy isn’t broken, it does feel stuck.”
The government is “making progress” in reversing a lack of investment under previous Conservative administrations, they added.
Friday’s GDP release comes as the Bank of England is expected to hold interest rates at 4 per cent at its meeting next week, following five cuts since the summer of 2024.
Policymakers face a delicate balancing act, with inflation at 3.8 per cent in July, far above the BoE’s 2 per cent, and increasing signs of a deteriorating labour market.
Following the release of the data, the pound slipped 0.2 per cent against the dollar to $1.355.