What's happened
UK GDP growth stalled in July amid weak manufacturing and consumer spending. The government’s recent tax hikes and underinvestment are blamed for the slowdown. As the autumn budget approaches, policymakers face tough choices on spending cuts or tax increases, with global trade uncertainties adding pressure.
What's behind the headline?
The UK economy's recent stagnation signals deeper structural issues. The flatlining GDP in July, despite some temporary boosts from events like England's Euro win, indicates a fragile recovery. The government’s tax increases, notably the £25bn rise in employer NICs, have likely suppressed hiring and investment, exacerbating the slowdown. Meanwhile, global uncertainties, especially US tariff policies, continue to weigh on trade and manufacturing. The property market, already subdued by high mortgage costs and affordability challenges, faces further risks if proposed property taxes are implemented. The Bank of England’s cautious rate cuts suggest policymakers are aware of inflationary pressures, but their effectiveness in stimulating growth remains uncertain. Overall, the UK’s economic outlook hinges on balancing fiscal discipline with measures to boost productivity and investment, amid external headwinds.
What the papers say
The Guardian reports that GDP growth flatlined in July, with manufacturing and consumer spending under pressure, highlighting the impact of recent tax hikes and global trade tensions. The Independent emphasizes the political and economic challenges Reeves faces ahead of her second budget, with business leaders warning against further tax increases. Both sources underline the fragile state of the UK economy, with The Guardian noting that growth is weak but not collapsing, and The Independent pointing to the risks of policy uncertainty and global trade issues. The contrasting perspectives reflect a consensus that the economy is struggling but still resilient enough to avoid a full recession, with the key question being how government policy will adapt to these pressures.
How we got here
The UK economy experienced a strong first half of 2025, driven by manufacturing and exports, but recent data shows a slowdown. Factors include US tariffs, tax changes, and underinvestment, which have collectively dampened growth and consumer confidence. The upcoming autumn budget is expected to address these issues amid a challenging global environment.
Go deeper
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