The UK economy flatlined in July, according to official figures, in grim news for Rachel Reeves as she gears up for a challenging budget.<\/p>\n
It was a slowdown compared with June, when the economy grew by 0.4%, according to the Office for National Statistics.<\/p>\n
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.<\/p>\n
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.<\/p>\n
The downbeat data will raise questions about Labour\u2019s promise to kickstart the economy.<\/p>\n
A Treasury spokesperson said: \u201cWe know there\u2019s more to do to boost growth, because, whilst our economy isn\u2019t broken, it does feel stuck. That\u2019s the result of years of underinvestment, which we\u2019re determined to reverse through our plan for change.\u201d<\/p>\n
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.<\/p>\n
ONS director of economic statistics Liz McKeown said: \u201cGrowth in the economy as a whole continued to slow over the last three months. While services growth held up, production fell back further.<\/p>\n
\u201cWithin 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.\u201d<\/p>\n
Business groups have blamed Reeves\u2019s \u00a325bn increase in employer national insurance contribution<\/a>, which came into force in April alongside a significant rise in the \u201cnational living wage\u201d, for constraining growth.<\/p>\n The British Chambers of Commerce (BCC) responded to the data by warning Reeves against levying more taxes on business.<\/p>\n Stuart Morrison, the BCC\u2019s research manager, said: \u201cThe business landscape remains challenging, particularly for SMEs, with cost pressures impacting investment, recruitment and trade.<\/p>\n \u201cThe government has acknowledged it has asked a lot of business in the past year. Our message is now clear \u2013 there must be no more taxes on business in the autumn budget.\u201d<\/p>\n The 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\u2019s forecasts.<\/p>\n skip past newsletter promotion<\/a><\/p>\n Sign up to Business Today<\/p>\n Get set for the working day \u2013 we’ll point you to all the business news and analysis you need every morning<\/p>\n Privacy Notice: Newsletters may contain information about charities, online ads, and content funded by outside parties. If you do not have an account, we will create a guest account for you on theguardian.com<\/a> to send you this newsletter. You can complete full registration at any time. For more information about how we use your data see our Privacy Policy<\/a>. We use Google reCaptcha to protect our website and the Google Privacy Policy<\/a> and Terms of Service<\/a> apply.<\/p>\n after newsletter promotion<\/p>\n After the news of zero growth in July, economists warned that speculation about tax increases was likely to continue weighing on confidence.<\/p>\n Fergus Jimenez-England, an associate economist at the National Institute of Economic and Social Research, said: \u201cEconomic 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.\u201d<\/p>\n Daisy Cooper, the Liberal Democrats\u2019 Treasury spokesperson, said: \u201cThe government talks of going full-throttle on growth but the reality is they have left the handbrake on.<\/p>\n \u201cTheir growth-crushing jobs tax risks hollowing out our high streets and ministers\u2019 refusal to jettison their shortsighted red lines on cutting red tape with Europe is holding back our exporters.\u201d<\/p>\n Trade data published alongside the GDP update showed the UK\u2019s goods deficit widening by \u00a33bn in the three months to July, to \u00a361.9bn. The ONS said exports to the US rose by \u00a3800m in July but had not returned to the levels seen before Donald Trump\u2019s tariffs were imposed.<\/p>\n