Recent figures released by Office for National Statistics (ONS) indicate the UK economy flattened out in July. This standstill underscores persistent issues that threaten our nation’s fiscal future. This continued stagnation is cause for alarm, especially as the country’s advance toward the pivotal fiscal year 2025 is full of important fiscal announcements. The upcoming Autumn Budget, scheduled for 26 November, will be closely watched, particularly as speculation mounts regarding potential tax increases.
To help us make sense of how each sector has performed during this challenging period, we spoke to Liz McKeown, director of economic statistics at the ONS. She noted that even as the economy overall faltered, some parts of the economy — especially in services — were flourishing.
“Among service-providing industries, health care, computer programming and office administrative services boomed,” said McKeown. Which means that there are islands of growth even in the ocean of stagnation.
Positive signals are starting to emerge in one of the hardest hit sectors. The general stagnation that set in during July might test the government’s fiscal plan. We’ve got high hopes that new Chancellor Rachel Reeves will tackle these issues head-on in her first budget speech scheduled for mid-April. Analysts think that she won’t be able to avoid raising new taxes to address the harshest realities of a changing economy.
Yael Selfin, chief economist at KPMG UK, said that the uncertainty surrounding the now-postponed Autumn Budget would hurt business confidence. The later date for this year’s Autumn Budget could add to the confusion for businesses, he warned. This uncertainty may lead to further postponement of investment decisions, impeding economic expansion until we have greater certainty. This is further evidence that companies may be postponing big capital commitments. They want to see much clearer guidance from the government.
This uncertainty is taking place during an already anxious recovery for almost any sector, including higher education, from past economic upheaval. The other big outperformer has been the health sector. Perhaps this success is most easily attributed to the unceasing demand for both medical services and advances in health technologies. Likewise, computer programming and office support services have boomed, echoing a sustained trend to digitization and remote work options.
The grim zero growth overall in July prompts several crucial questions. We should question whether these gains are sustainable, especially in the context of a growing national economy. Many experts suggest that while certain sectors flourish, they may not be enough to counterbalance weaknesses elsewhere in the economy.
With the Autumn Budget fast approaching, business leaders across the country are looking for clarity. Economists have long called on the government to be more transparent about its fiscal plans. This prolonged announcement of tax and spend measures adds to the business community’s uncertainty. Specifically, they now will likely take an extremely risk-averse mindset to subsequent investments.