Stagnant GDP shows scale of challenge for Rachel Reeves at autumn budget

"The latest GDP figures, released on Friday, highlight the scale of the challenge for Reeves at her autumn budget. Growth flatlined in July, slowing from 0.4% in June, as the economy struggled for momentum over the summer. Some of the weakness can be explained away. Most economists had anticipated a slowdown after Britain recorded the strongest growth in the G7 in the first half of the year."

"Manufacturers and exporters had rushed to beat the introduction of Donald Trump's tariffs early in 2025. However, with US stockpiles now filled, and global uncertainty weighing on industry, new orders have slumped reflected by a 1.1% plunge in manufacturing output in July. Tax changes this spring had also pulled forward activity in the property market and influenced car sales, leading to more monthly volatility in the GDP numbers."

"Households are under pressure from rising inflation. Consumer-facing services recorded no growth in July, despite a decent month for retailers as hot weather and England winning the Euro 2025 women's football tournament helped to lift sales. But, taken together over the past three months, spending was in the doldrums, with a 0.6% slump in consumer-facing services. The government also blames years of underinvestment under the Conservatives."

GDP growth flatlined in July after stronger early-year performance, leaving the economy stuck rather than broken. Manufacturing output plunged 1.1% as exporters and manufacturers exhausted pre-tariff orders and global uncertainty reduced new orders. Tax-driven effects pulled activity forward in property and car markets, adding monthly volatility. Consumer-facing services showed no growth in July and fell 0.6% over three months, while retailers briefly benefited from hot weather and England's Euro 2025 win. Households face pressure from rising inflation. Government points to years of underinvestment, and a recent rise in employer national insurance contributions is blamed for damping hiring and investment ahead of the next budget.

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