The UK economy failed to grow in July, according to official data, with the Labour government struggling to drive growth despite its core commitment to do so.
The Labour government has doubled down on its “growth mission” by making a string of new economics-focused appointments across ministerial and advisory roles, and establishing a business-friendly board aimed to boost relations with the private sector.
But the Office for National Statistics has suggested that the UK economy is failing to expand at pace.
July’s growth rate stood at zero per cent, data collectors said.
The ONS said it was also changing its presentation of GDP to lead with changes across three-month periods. In the three months to July, growth was 0.2 per cent,
Figures for growth in the second quarter were kept at 0.3 per cent, which was higher than initial expectations but lower than an initial 0.7 per cent surge in the first three months of the year.
For July, official data showed the services sector grew 0.4 per cent in the three-month period to July while production declined by 1.3 per cent.
Construction activity up by 0.6 per cent.
“Growth in the economy as a whole continued to slow over the last three months,” said Liz McKeown, director of economic statistics at the ONS.
“In the latest month GDP showed no growth, with increases in services and construction offset by falls in production.”
Labour’s tough months ahead
Fresh data is likely to unnerve Treasury officials, with ministers and advisers scrambling to develop policies that could be viewed positively by the Office for Budget Responsibility (OBR) ahead of an expected downgrade to productivity forecasts.
Chancellor Rachel Reeves said on Thursday she was planning to revise business rates to solve “cliff edge” taxes for small businesses and boost investment levels.
Plans to overhaul the tax system have received support from leading business groups, including UKHospitality, which has been a staunch critic of the government’s high taxes and Employment Rights Bill.
City analysts widely expect Reeves to hike taxes by at least £20bn later this year to rebuild her fiscal headroom as borrowing costs continue to rise.
Mervyn King, the former Governor of the Bank of England, said the UK’s debt was “not in a comfortable position” and that Western nations “ought to be very concerned” about borrowing more.
Reeves has herself recognised that higher taxes could dent growth in the UK, with the Treasury centring the Autumn Budget around “fairness” for UK taxpayers.
It could target excise duties on gambling and alcohol, as well as revise property taxes to boost growth.
Economists at Goldman Sachs have warned that tweaks to small revenue-raisers for the government could lead to more unpredictable effects.