The UK economy flatlined in July, weighed down by its steepest fall in manufacturing output in a year, adding pressure on the government ahead of November’s Budget.
Figures from the Office for National Statistics (ONS) showed zero growth in July, following a 0.4% expansion in June. Over the three months to July, however, the economy managed modest growth of 0.2%. The ONS said the latest data suggested the economy had “continued to slow” but remained on track for growth in the third quarter.
While the service sector expanded by 0.4% in the three-month period—buoyed by health services, computer programming and office support—this was offset by weakness in production industries. Manufacturing output fell by 1.3% in July alone, the sharpest monthly decline since July 2024.
The UK economy grew by 0.7% in the first quarter of 2025 and by 0.3% between April and June, but economists warn that momentum is fading.
Rob Wood, chief UK economist at Pantheon Macroeconomics, said Britain’s finances remained “pretty resilient to the barrage of shocks faced this year.” Yet others were more cautious. “The weak start to the third quarter [is] a sign of things to come,” said Yael Selfin, chief economist at KPMG UK. She added that temporary drivers of growth earlier in the year were fading, while the later-than-usual Autumn Budget could prolong uncertainty and delay business investment.
The figures land at a politically sensitive moment, with Chancellor Rachel Reeves preparing her 26 November Budget. Reeves is expected to set out tax and spending plans against mounting speculation that she may need to raise taxes to stay within her fiscal rules. Business groups have already warned that higher levies could dampen growth.
The data also adds to the Bank of England’s dilemma ahead of its 18 September interest rate decision. Policymakers must weigh weaker growth against persistent inflationary pressures as they consider whether to keep borrowing costs elevated.
The Treasury acknowledged the need for stronger growth. “We know there’s more to do because whilst our economy isn’t broken, it does feel stuck,” a spokesperson said, blaming “years of underinvestment” and pledging reforms through the government’s “plan for change.”
Opposition parties seized on the figures. Shadow chancellor Sir Mel Stride said borrowing costs hitting a 27-year high underscored “a damning vote of no confidence in Labour,” while Liberal Democrat Treasury spokesperson Daisy Cooper accused ministers of leaving “the handbrake on,” citing tax policies and trade red tape.
With the Budget looming and growth faltering, analysts say the coming months will be critical for shaping both the economic outlook and the government’s credibility on its flagship priority.
