UK Economy Stalls: Implications of July’s Stagnation Ahead of Upcoming Autumn Budget
UK Economy Stalls in July as Signs of Slowdown Emerge
In July the United Kingdom’s economy did not grow. The numbers now point to a slowdown that puts more strain on Chancellor Rachel Reeves. She prepares for the Autumn Budget on November 26, 2025. The Office for National Statistics shared the data on Friday. The report shows no growth in July. It matches economists’ checks and slows down from the 0.4% rise in June.
Key Highlights from the Economic Data
- Stagnation in July: The economy stayed the same in July. There was no drop; there was no rise.
- Sector Performance:
- Production output fell by 0.9%
- Services and construction moved up by small steps.
- Quarterly Growth Trends:
- Growth in the second quarter of 2025 came in at 0.3%
- This is lower than the 0.7% seen in the first quarter
- Economic Outlook: Economists now see a slower pace for the UK later in 2025. ### Expert Perspectives
Sanjay Raja from Deutsche Bank, who acts as the lead UK economist, said:
"After a strong second quarter that showed the fastest growth among the G7, all ties now suggest a slowdown in the second half of the year." He connects this with shifts in trade, stockpiling behavior, changes in net purchases of precious metals, and cuts in public sector spending.
Paul Dales from Capital Economics, the chief UK economist, added:
"The flat real GDP in July shows that the economy is finding it hard to get back on track after past tax rises and hints of more in the Autumn Budget." He thinks any later tax rises will face close watch for their effect on growth.
Fiscal and Monetary Challenges Ahead
For Chancellor Rachel Reeves, who keeps the economy’s revival and spending control in view, the flat growth comes at a sensitive time. Reeves vows that spending will use tax money and not more debt. She wants to cut the UK’s debt in the coming years. Slower growth now makes these aims tougher to reach.
At the same moment, the Bank of England works between higher inflation and softer growth. Inflation hit 3.8% in July. The rise broke past forecasts and makes some worry that cuts to interest rates may pause.
Fabio Balboni from HSBC, a senior European economist, shared last week:
"Inflation staying high makes it tough for the bank to cut rates further. At the same time, fiscal issues grow as big deficits and stiff choices build up for the Autumn Budget."
Bank of England Interest Rate Outlook
The Monetary Policy Committee at the Bank of England will meet on September 18. In August, they lowered rates by 25 basis points to 4%. The split vote of 5–4 means that the bank is most likely to keep rates as they are now. Many now peer to the meeting on November 6. It comes just before the Autumn Budget and may mark a new step for money policy.
Carsten Brzeski, ING’s global head of macro, said:
"We still see a rate cut in November, though the firm tone seen in August makes us less sure of that idea."
Looking Ahead
Economic growth has slowed and inflation stays high. At the same time, uncertainty about government spending grows. The UK now faces many hurdles as it moves toward the end of 2025. Chancellor Reeves’ Autumn Budget stands as a key moment while the government seeks to balance growth with a strict fiscal plan. All this happens as global conditions stay cautious.
For ongoing updates and expert analysis on the UK economy and financial markets, stay tuned to CNBC and other leading financial news providers.
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