The Office for National Statistics (ONS) has today published the most up-to-date official figures. They indicate that the UK economy flatlined in July. Businesses are living with the consequences of this stalemate. At the same time, Chancellor Rachel Reeves is gearing up to present the new government’s tax and spending plans in an Autumn Budget on November 26. Speculation is mounting that Reeves might have to raise taxes in order to keep the state’s economy afloat.
The ONS report points out that despite no growth in the economy as a whole, many services sectors were robust. Liz McKeown, the director of economic statistics at the ONS, drew attention to a number of bright spots. Health, computer programming and office support services all did well within the service sector. This outperformance seems especially notable given the broader economic context. This was driven by notable decreases in production from broad-based weakness across manufacturing sectors.
Yael Selfin, chief economist at KPMG UK, said he was dismayed by the timing of the Autumn Budget. She pointed out that the Autumn Budget’s later date could mean a perilous period of uncertainty for businesses. This lack of clarity may delay investment decisions and slow growth. This statement represents a rapidly developing fear within private enterprise over how best to invest with the economy in constant turmoil.
This lack of any growth in July presents an extremely difficult set of circumstances for the UK government. The expected Autumn Budget is Reeves’ first opportunity to address all these shortcomings directly. Or, she could propose more supply-side policies designed to increase long-term growth. Selfin also pointed out that the sources of growth are expected to remain tight in the months ahead. He thinks the Autumn Budget provides the government with an opportunity to bring forward meaningful supply-side policy that would lay the foundations for sustained long-term growth and help enable a short-term recovery in sentiment.
Though the services sector has been more hopeful, the broader economic picture is bleak. The stagnation of growth from July shows just how badly targeted, strategic economic stimulus is needed to create jobs and activities in all sectors of the economy. At least health and technology services are exceeding expectations, providing us with a silver lined cloud of hope. We need to address what’s beneath the surface systemic issues that remain to be addressed.