UK Economy Stalls in July as Manufacturing Output Falls

The UK economy ground to a halt in July, registering zero growth according to the latest official figures from the Office for National Statistics. The data show that the economy’s sluggishness at the start of the third quarter was sharper than most economists had forecast, with manufacturing and production sectors faring particularly poorly.

Manufacturing output experienced a significant setback, falling by 1.3 per cent within the month. Overall, the broader production sector registered a decline of 0.9 per cent, bringing industrial output to its lowest levels since January. Conversely, the construction sector, which has been a relative bright spot this year, managed a modest gain of 0.2 per cent in July.

The services sector, now accounting for nearly three quarters of the national economy, expanded slightly by 0.1 per cent. Notably, the human health sector grew by 0.6 per cent, a positive sign despite ongoing NHS strike action, with thousands more doctors’ appointments reportedly protected compared with previous industrial actions. Professional services and ICT sectors ranked among the weakest performers over the same period.

Despite the disappointing monthly figures, the three-month rolling measure shows the UK economy expanding by 0.2 per cent, aligning with the ONS’s move to prioritise this metric for a less volatile economic picture. The first half of 2025 defied expectations, posting consecutive quarterly expansions of 0.7 per cent and 0.3 per cent, but recent data raise concerns that the second half of the year may see a more pronounced slowdown.

Rising inflation and persistently high interest rates are expected to weigh on growth throughout the remainder of the year, with analysts predicting a third-quarter expansion of just 0.2 to 0.3 per cent. The Bank of England is likely to keep rates static through the year’s end, as inflation is set to peak near 4 per cent in the coming months. These trends are being closely monitored by Chancellor Rachel Reeves, whose upcoming autumn budget will reflect shifting growth and fiscal forecasts.

Sterling has reacted negatively to the economic news, falling against both the US dollar and the euro. Meanwhile, government borrowing costs edged higher and the FTSE 250 dipped slightly, despite a modest rise in the FTSE 100. Treasury officials continue to emphasise their commitment to reversing years of underinvestment to get the economy moving again, with growth so far this year still outpacing other G7 economies.