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UK economy stalls in July, as slowdown sets in

by Holly Ellyatt,Sophie Kiderlin
September 12, 2025
in Finance
Reading Time: 3 mins read
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A highway closure signal leans towards a wall outdoors Royal Trade within the coronary heart of the Metropolis of London, on thirteenth June 2022, in London, England.

Richard Baker | In Photos | Getty Photos

U.Okay. financial development flatlined in July, in line with knowledge revealed Friday, including to Chancellor Rachel Reeves’ headache forward of the Autumn Finances.

The determine was according to expectations of economists polled by Reuters, and follows a 0.4% growth in June.

In July, weak spot was concentrated in manufacturing output, which contracted by 0.9%, whereas providers and building output each inched larger, the U.Okay.’s Workplace for Nationwide Statistics famous.

It comes after the financial system grew by a better-than-expected 0.3% within the second quarter, though this was down from bumper development of 0.7% seen within the first quarter.

Economists now count on a slowdown to snatch the U.Okay. within the latter half of 2025.

“After a surprisingly stronger second quarter, the place the U.Okay. claimed the quickest development charge amongst G7 economies, all indicators level to a slowdown in financial exercise within the second half of the 12 months,” Sanjay Raja, Deutsche Financial institution’s chief U.Okay. economist, famous this week.

“A course correction in trade-fronting, stockpiling, web acquisitions of treasured metals, and public sector spending, we predict, will see U.Okay. GDP development sluggish into the second half of 2025,” he added in emailed feedback.

Headache for Rachel Reeves

Finance Minister Reeves has made reviving the U.Okay. financial system a prime precedence, however thus far has struggled to show her pledges into actuality.

An financial slowdown is a blow to the federal government forward of the Autumn Finances on Nov. 26, a high-stakes occasion for Reeves who has promised to make sure spending is funded by tax receipts, quite than borrowing, and to decrease U.Okay. debt over the following few years.

As such, any potential tax hikes are a specific focus, Paul Dales, chief U.Okay. economist at Capital Economics, prompt in a notice Friday.

“The stagnation in actual GDP in July … reveals that the financial system remains to be struggling to achieve respectable momentum within the face of the drag from earlier hikes in taxes and attainable additional tax rises to come back within the Finances,” he stated.

The Financial institution of England, in the meantime, is making an attempt to weigh this fiscal uncertainty with sticky inflation (which rose to a hotter-than-expected 3.8% in July).

“The comfortable efficiency of the financial system in July in all probability is not sufficient to offset the Financial institution of England’s rising inflation fears,” Dales famous.

Fabio Balboni, senior European economist at HSBC, struck an analogous tone, telling CNBC final week that “inflation resilience clearly makes it more durable for central banks to chop additional.”

“Then, alternatively, you may have fiscal issues, nonetheless very giant fiscal deficits, beginning within the U.Okay., as an illustration, with very troublesome determination looming forward for the federal government on the Autumn Finances,” Balboni added.

The Financial institution of England is because of meet within the meantime on Sept. 18, however is predicted to carry charges regular after slicing them in August. Then, the financial institution’s nine-member financial coverage committee voted by a majority of 5–4 to scale back the key rate of interest, the “Financial institution Charge,” by 25 foundation factors to 4%, saying it was taking a “gradual and cautious” strategy to financial easing.

The central financial institution’s Nov. 6 assembly is now within the highlight, notably because it comes simply forward of the finances.

“We nonetheless count on a charge reduce in November, although the hawkish August determination weakened our conviction,” Carsten Brzeski, international head of Macro at ING, stated Thursday.



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Tags: EconomyJulySetsslowdownstalls
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