Data released from the ONS today has indicated that monthly GDP growth ground to a halt, after a promising 0.4% rise in June, output in July was flat, neither advancing nor contracting.
Over the three months to July, however, the picture shows modest forward momentum: GDP rose by 0.2% compared to the three months to April, a slowdown from earlier quarters. Services and construction provided the bulk of this growth, while production notably lagged behind according to the ONS.
With the budget set for November and the Bank of England’s MPC meeting next week for the September interest rate decision, there’s a lot for advisers and wealth managers to read into the economic data right now. Inflation data is out next Wednesday which will be another key indicator of the economy.
Lindsay James, investment strategist at Quilter, said:
“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.”
Luke Bartholomew, Deputy Chief Economist, at Aberdeen said;
“UK GDP flatlined in July, as expected, in part due to payback from very strong growth in June. The monthly GDP data are very volatile month to month and it can be hard to extract signal from the noise. But with the labour market still deteriorating we expect H2 GDP overall to slow from the pace of H1. The key questions for the Bank of England though are more about inflation than growth right now, so this report is unlikely to change much in the way of the Bank’s thinking. We still expect one more interest rate cut later this year, but this is looking a finely balanced call.”
Jeremy Batstone-Carr, European Strategist at Raymond James, said:
“A spell of pleasant summer weather may not be the most reliable foundation for an economic recovery, but today’s disappointing July GDP growth data could have been worse without it. Today’s data confirms that the UK economy stalled at the start of the second half of the year. While a flat outcome may not appear all that much to write home about, the underlying detail provides some scope for cautious optimism.
“Warm July weather did little to encourage households to get out and spend, a view corroborated by flat retail sales and muted spending on hospitality. However, agricultural and construction sectors benefitted from the warmth, offsetting the admittedly limited adverse impact of the junior doctors’ strike action. Successive months of strength in manufacturing came to end, and the same warm weather that failed to bring out the crowds served to ensure a decline in utility output and a subdued contribution from mining activities.
“The UK economy benefited greatly from net trade over Q1 as companies raced to beat tariff implementation from April, and the balance proved more favourable than expected over Q2. Although net trade trod water at the start of Q3, subdued levels of global economic activity are likely to suppress demand for UK exports moving forward.
“On balance, the UK’s weakness, will be disappointing news for the Treasury as it prepares for November’s Budget. The Bank of England has signalled it is unlikely to read too much into this lagging data, focusing instead on inflation developments and the health of the employment market to guide its policy calibration over the coming months.”
Jonathan Marchant, Fund Manager at Mattioli Woods, said:
“UK GDP numbers were in line with expectations in July, with a +0.0% print over the month and +0.2% print over the preceding 3-month period. While growth appears to have stalled over the month, the figures follow several forecast-beating economic indicators over recent weeks, including retail sales, purchasing managers’ index (PMI) and consumer confidence figures.
“With last month’s inflation numbers surpassing expectations and other indicators proving better than forecast, the chances of an interest rate cut at next week’s Monetary Policy Committee meeting were already slim. With today’s figures meeting expectations, policymakers are almost certain to hold interest rates steady.
“Though few care to admit it, the UK economy has shown remarkable resilience in the face of multiple exogenous shocks over recent years, from volatile energy prices to trade tariffs. However, it remains to be seen whether the economy can generate positive momentum heading into the budget, where the range of potential outcomes remains wide.”
Douglas Grant, Group CEO of Manx Financial Group, said:
“Today’s GDP figures highlight the concerningly fragile state of the UK economy, with SMEs bearing the brunt of persistent cost-of-living pressures, elevated borrowing costs, and geopolitical uncertainty.
“Recent research from Manx Financial Group reveals that nearly a third of SMEs have been forced to pause or halt parts of their business over the past two years due to lack of finance, while 38% now expect stagnant growth in the year ahead, a sharp rise from 25% in 2024.
“SMEs urgently need affordable credit, stability, and a supportive policy environment to offset these headwinds and unlock growth potential. Regular budget reviews, resilient supply chains, and strategic investment in new technologies will help strengthen efficiency and productivity. But businesses cannot carry this burden alone. November’s Autumn Statement provides a pivotal opportunity for the Chancellor to act decisively by diversifying markets, modernising taxation, and accelerating digital and financial support for SMEs. Doing so is critical to ensuring these firms remain resilient, adaptable, and the backbone of the UK economy.”
George Lagarias, Chief Economist at Forvis Mazars, said:
“The UK economy continues to grow at a sluggish pace, as industrial production suffers from worsening global demand. The services sector keeps things humming, but the economy needs more than just services if it is to break out of its rut. The central bank, which sees inflation pressures still somewhat intense, can do very little until next year, so it will be up to the government’s fiscal policy, or to a reversal of international trade conditions if growth is to pick up.”
Derrick Dunne, CEO of YOU Asset Management, said:
“We’re now well on the approach to the Autumn Budget, so flat GDP figures are going to be disappointing reading for both the Government and households. The bond market is restive with yields on the move and confidence in the state’s fiscal positioning wavering at best. The economy needs growth to outrun its debts and at present, this is not being delivered.
“With higher levels of inflation putting evermore pressure on the sums too, it remains to be seen now what drastic measures may be planned by Reeves and Starmer. The message for savers and investors is to ensure you have a clear plan in place to weather any potential outcome.
“Anyone who is unsure about how this could impact their personal finances should speak to a financial planner.”
Richard Pike, chief sales and marketing officer at Phoebus said:
“Flat monthly GDP highlights the fragile state of the UK economy and raises fresh questions about how policymakers will respond. The Bank of England may feel renewed pressure to take a more supportive stance, whether through signalling future rate cuts or other measures to stimulate demand. For the housing market, weaker growth risks dampening buyer confidence and delaying decisions, particularly at a time when affordability remains stretched. Any action to underpin the wider economy will be watched closely by households and the property sector alike.”
