UK economy stalls in July, as slowdown sets in

The U.K. economy registered zero growth in July, according to the latest data from the U.K.’s Office for National Statistics on Friday.

Economists polled by Reuters had expected the country’s gross domestic product (GDP) to be flat, following a 0.4% expansion in June.

It comes after the economy grew by a better-than-expected 0.3% in the second quarter, although this was down from bumper growth of 0.7% seen in the first quarter.

Economists now expect a slowdown to take hold of the U.K. in the latter half of 2025.

“After a surprisingly stronger second quarter, where the U.K. claimed the fastest growth rate among G7 economies, all signs point to a slowdown in economic activity in the second half of the year,” Sanjay Raja, Deutsche Bank’s chief U.K. economist, noted this week.

“A course correction in trade-fronting, stockpiling, net acquisitions of precious metals, and public sector spending, we think, will see U.K. GDP growth slow into the second half of 2025,” he added in emailed comments.

An economic slowdown will add to the Bank of England’s current dilemma, as it weighs sticky inflation (which rose to a hotter-than-expected 3.8% in July), with the Autumn Budget of Nov. 26, in which Chancellor Rachel Reeves will reveal her fiscal plans for 2026.

“Inflation resilience obviously makes it harder for central banks to cut further,” Fabio Balboni, senior European economist at HSBC, told CNBC last week.

“Then, on the other hand, you have fiscal concerns, still very large fiscal deficits, starting in the U.K., for instance, with very difficult decision looming ahead for the government at the Autumn Budget,” Balboni added.

The Bank of England is due to meet in the meantime on Sept. 18, but is expected to hold rates steady after cutting them in August.

Then, the bank’s nine-member monetary policy committee voted by a majority of 5–4 to reduce the key interest rate, the “Bank Rate,” by 25 basis points to 4%, saying it was taking a “gradual and careful” approach to monetary easing.

The central bank’s Nov. 6 meeting is now in the spotlight, particularly as it comes just ahead of the budget.

“We still expect a rate cut in November, though the hawkish August decision weakened our conviction,” Carsten Brzeski, global head of Macro at ING, said Thursday.