UK economy stagnates in July 2024

The Office for National Statistics (ONS) has released its latest figures, revealing that the UK economy showed no growth in July 2024, marking the second consecutive month of stagnation. This follows a similarly flat performance in June 2024, highlighting ongoing challenges across various sectors of the economy.

According to the ONS, real GDP remained unchanged in July 2024 after registering no growth in June 2024. However, on a more positive note, the UK economy did see some momentum over the longer term, with GDP growing by 0.5% in the three months leading up to July 2024 compared to the preceding three months (April 2024). This growth was largely driven by widespread gains in the services sector.

The services sector, a key component of the UK economy, experienced a modest increase of 0.1% in July 2024, rebounding slightly from a 0.1% decline in June 2024. Over the three months to July 2024, the services sector grew by 0.6%, reflecting its resilience despite ongoing economic headwinds.

In contrast to the modest growth in services, the production sector saw a notable contraction, with output decreasing by 0.8% in July 2024. This downturn follows a strong 0.8% growth in June 2024, illustrating the sector’s volatility. Over the three-month period to July 2024, production output decreased by 0.1%.

The manufacturing sub-sector, in particular, struggled with output falling by 1.0% in July 2024. This decline, which was the largest contributor to the overall drop in production output, was driven primarily by the manufacturing of transport equipment. The Society of Motor Manufacturers and Traders (SMMT) attributed this decline to a slowdown in car production, as factories prepared for new model releases and faced temporary supply chain constraints.

The construction sector also faced challenges in July 2024, with output falling by 0.4%. This decline followed a 0.5% increase in June 2024. Despite the monthly drop, construction output managed to grow by 1.2% over the three months to July 2024, marking the sector’s first positive quarterly growth since September 2023.

Interestingly, the ONS highlighted that various major sporting events in July 2024, including the Euros, the Olympics, and Wimbledon, played a significant role in shaping the month’s economic performance. These events contributed to growth in the arts, entertainment, and recreation sectors, with many businesses in these areas reporting higher turnover than in previous years.

Retail trade also saw a boost, partly attributed to the surge in consumer activity linked to these sporting events. The increased footfall and spending associated with these events likely provided some support to sectors that otherwise might have faced more significant declines.

“Despite the economy feeling a little sluggish, at the coal-face, UK SMEs remain optimistic about their growth prospects. But with the new Labour government signposting a “painful” budget, the business community remains disinclined to invest capital until the government shows its hand. A lot will be on the line when the Chancellor takes to the dispatch box on October 30th. 

“What businesses crave, whatever their size, is certainty. And up and down the country, businesses small and large need to hear a clear and unambiguous roadmap for growth. Innovation and entrepreneurship must be encouraged, and finances need to be readily available to upskill workers and chase opportunities. The Government’s plans rely on successfully securing growth. And to do that successfully, SMEs cannot be ignored.”