UK economy flatlines in July in grim news for Rachel Reeves
The UK economy flatlined in July, according to official figures, in grim news for Rachel Reeves as she gears up for a challenging budget.It was a slowdown compared with June, when the economy grew by 0.4%, according to the Office for National Statistics.GDP expanded strongly in the first half of the year, making the UK the fastest-growing economy in the G7, but it had been widely expected to slow in the second half.The ONS said that growth in the services and construction sectors in July was offset by a 0.
9% fall in the production sector, which includes manufacturing,The downbeat data will raise questions about Labour’s promise to kickstart the economy,A Treasury spokesperson said: “We know there’s more to do to boost growth, because, whilst our economy isn’t broken, it does feel stuck,That’s the result of years of underinvestment, which we’re determined to reverse through our plan for change,”The ONS said that GDP grew by 0.
2% in the three months to July, compared with the three months to April, down from 0.3% in the three months to June.Statisticians see three-month figures as a better guide to the underlying health of the economy than one-month data, which tends to be more volatile.The ONS director of economic statistics, Liz McKeown, said: “Growth in the economy as a whole continued to slow over the last three months.While services growth held up, production fell back further.
“Within services, health, computer programming and office support services all performed well, while the falls in production were driven by broad-based weakness across manufacturing industries,”The pound weakened after the news, to trade 0,2% lower at $1,355 against the US dollar by mid-morning in London,Business groups have blamed Reeves’s £25bn increase in employer national insurance contribution, which came into force in April alongside a significant rise in the national living wage, for constraining growth.
The British Chambers of Commerce (BCC) responded to the data by warning Reeves against levying more taxes on business.Stuart Morrison, the BCC’s research manager, said: “The business landscape remains challenging, particularly for SMEs [small and medium-size enterprises], with cost pressures impacting investment, recruitment and trade.“The government has acknowledged it has asked a lot of business in the past year.Our message is now clear – there must be no more taxes on business in the autumn budget.”Sign up to Business TodayGet set for the working day – we'll point you to all the business news and analysis you need every morningafter newsletter promotionThe chancellor is widely expected to have to present a package of tax increases when she delivers her second budget on 26 November, to compensate for an anticipated downgrade in the Office for Budget Responsibility’s forecasts.
However, after the news of zero growth in July, economists warned that speculation about tax increases was likely to continue weighing on confidence,Fergus Jimenez-England, an associate economist at the National Institute of Economic and Social Research, said: “Economic activity in the third quarter will be constrained by fiscal uncertainty weighing on household and business sentiments,Growth at this pace will do little to ease the fiscal challenges confronting the chancellor this autumn,”Daisy Cooper, the Liberal Democrats’ Treasury spokesperson, said: “The government talks of going full-throttle on growth but the reality is they have left the handbrake on,“Their growth-crushing jobs tax risks hollowing out our high streets and ministers’ refusal to jettison their shortsighted red lines on cutting red tape with Europe is holding back our exporters.
”Trade data published alongside the GDP update showed the UK’s goods deficit widening by £3bn in the three months to July, to £61.9bn.The ONS said exports to the US rose by £800m in July but had not returned to the levels seen before Donald Trump’s tariffs were imposed.The slowdown in economic growth comes alongside higher-than-expected inflation, which jumped to 3.8% in July, prompting investors to rein in expectations of further interest rate cuts from the Bank of England in the coming months.
The Bank’s nine-member monetary policy committee is expected to leave rates on hold at 4% when it meets next Thursday,Jobs and inflation data, due to be published earlier in the week, will give more detail of the state of the economy – though policymakers have repeatedly warned that known flaws in ONS data are making it difficult to get a clear picture,
The ‘war on drugs’ has failed. There’s another way to solve the US fentanyl crisis | Letter
Your editorial on the so-called war on drugs (Donald Trump is turning a failed metaphor into a more dangerous reality, 7 September) is correct: the extrajudicial killing of alleged drug traffickers will not solve the US fentanyl crisis.Anyone who has followed past attempts to militarise drug law enforcement will know that such efforts are bound to fail. For instance, despite billions in military and counternarcotics assistance by successive US administrations, Colombia now produces more cocaine than ever before, flooding a rapidly growing market.Similarly, hard-hitting military responses in one country have pushed the problem across borders. Ecuador and Brazil have experienced significant surges in drug trafficking and crime as a result of Colombia’s (unsuccessful) crackdowns
Downing Street says Starmer still has ‘confidence in his top team’ after Rayner and Mandelson departures – as it happened
Downing Street said Keir Starmer still had confidence in his “top team” follow questions over his chief of staff Morgan McSweeney, who was reported to have lobbied for Peter Mandelson’s initial appointment.Education secretary Bridget Phillipson, and the ousted cabinet minister Lucy Powell, are set to be the two candidates for Labour’s deputy leadership as other candidates struggled to get the minimum number of nominations. On Wednesday evening, Phillipson had the backing of 116 MPs and Powell had 77 nominations, three short of the required 80.The chairwoman of parliament’s Foreign Affairs Committee has written to the foreign secretary demanding answers on the vetting process for Peter Mandelson’s appointment as ambassador to the US. Emily Thornberry wrote to Yvette Cooper, who took over as foreign secretary after the cabinet reshuffle, asking for clarification on what security concerns were raised during the process and how the Foreign Office responded to those concerns
Labour deputy contender Lucy Powell calls for culture change at No 10
Lucy Powell has called for a “change of culture” inside Keir Starmer’s Downing Street to make it more inclusive and better connected to MPs, promising that as Labour’s deputy leader she would when needed deliver difficult truths to the prime minister.Speaking to the Guardian after she secured 117 MP nominations in the battle to replace Angela Rayner, Powell said a sequence of what she called “unforced errors” by the government had left many Labour MPs and members frustrated.Powell now faces a vote of party members against Bridget Phillipson, the education secretary, who reached 175 endorsements and is viewed as No 10’s preferred choice to take on the role.Powell was Commons leader until she was sacked from the government in last week’s reshuffle, a decision she said was a complete shock, and for which she had as yet received no explanation.She said she believed it could be because she sometimes passed on MPs’ concerns to Downing Street, and that if elected she would hope to continue such a “shop steward” role, making the government less factional and closed-off
Starmer urged to do more to push back against ‘onslaught of racism’
Senior Labour MPs and the UK’s largest anti-fascist campaign group have called on Keir Starmer to mount a more heartfelt defence of diversity and anti-racism. They say they fear that Labour is not yet putting its “heart and soul” into the battle against Nigel Farage and the far right.Hope Not Hate’s chief executive has written a letter to Starmer in the lead up to a planned far-right demonstration in London on Saturday, demanding the prime minister speak up more against hate and racism.In the letter, Nick Lowles said: “Hate breeds when those in power are silent. I implore you and other ministers to speak out urgently in defence of our migrant communities and our multicultural society more generally
Share your question for the Labour party deputy leadership candidates
Education secretary Bridget Phillipson, and the ousted cabinet minister Lucy Powell, are set to be the two candidates for Labour’s deputy leadership as other candidates struggled to get the minimum number of nominations.On Wednesday evening, Phillipson had the backing of 116 MPs and Powell had 77 nominations, three short of the required 80.Bell Ribeiro-Addy and Paula Barker received support from fewer than 15 MPs, with Emily Thornberry announcing on Thursday she had withdrawn from the race. The communities minister Alison McGovern pulled out on Wednesday afternoon and endorsed Phillipson.The ballot for members to vote will open on Wednesday 8 October and they will have until Thursday 23 October to have their say
Sir Robert Worcester obituary
On the morning of 16 March 1976, Robert Worcester – universally known as “Bob” – received the phone call that converted him from the head of a little-known market research company into the public face of polling in Britain. The call was from Harold Evans, the editor of the Sunday Times. Harold Wilson had just announced his retirement as prime minister. Evans wanted to find out whom voters wanted as the next Labour leader. Who better to conduct the survey than Labour’s own private pollster: Worcester himself?The poll, showing James Callaghan well ahead, provided the front-page lead for the following Sunday’s paper
Snapchat allows drug dealers to operate openly on platform, finds Danish study
Skip Apple’s new iPhone – five tips to make your old phone feel new again
How to Save the Internet by Nick Clegg review – spinning Silicon Valley
Apple debuts thinner, $999 iPhone Air at ‘awe-dropping’ annual product event
How Google dodged a major breakup – and why OpenAI is to thank for it
The women in love with AI companions: ‘I vowed to my chatbot that I wouldn’t leave him’