UK Economy Stays Flat in July as Labour Takes Office
According to official data, the UK economy saw no significant growth in July and stayed flat for the second month.
Mixed Results Across Different Sectors
While some parts of the economy saw progress, others struggled. The services industry did experience growth, particularly in retail sales and health services, where fewer strikes helped boost output. Retail and healthcare grew by 0.5%, while accommodation and food services rose by 0.9% due to better-than-expected performance.
However, this progress was canceled out by setbacks in other sectors. The professional services sector, which includes businesses like advertising and engineering, saw a 1.3% drop. This decline was largely due to robust growth earlier in the year, which couldn’t be sustained.
The manufacturing sector also performed poorly, shrinking by 1%. This was partly because of weaker global demand for goods and increasing competition from Chinese exports. Construction activity fell by 0.4%, with bad weather in July slowing down building projects nationwide.
Interest Rates Likely to Remain Unchanged
The Bank of England will soon meet to discuss changes to interest rates. Although the recent lack of growth might lead some to think that a rate cut could be on the horizon, most experts believe it’s unlikely to happen until November. The main reason is inflation, especially in the services sector, which the Bank of England is still closely monitoring.
The central bank has raised interest rates several times to fight inflation, making borrowing more expensive. However, the current state of the economy may prompt them to keep rates steady for now.
Government’s View on the Economy
Chancellor Rachel Reeves has acknowledged the challenges ahead. In her statement, she said:
“I understand that this is a tough situation, and I want to be honest with the British people—change won’t happen overnight. Although we’ve seen two quarters of economic growth, it doesn’t make up for the last 14 years of slow progress. That’s why we focus on long-term strategies to strengthen the economy.”
Her comments reflect the government’s commitment to long-term planning, aiming to create more sustainable growth, even though immediate improvements seem unlikely.
Rightmove Rejects a Buyout Offer from REA
In business news, Rightmove, the UK’s largest online real-estate portal, turned down a £5.6 billion buyout offer from REA, an Australian property company owned by Rupert Murdoch’s News Corp. Rightmove’s board rejected the offer, which would have included a combination of cash and shares. Despite this, Rightmove’s share price increased slightly after the news, reflecting investor interest in the potential deal.
Future Outlook
The UK economy’s immediate future remains uncertain. Economists expect a tough budget from the Chancellor in October, as she must convince the Office for Budget Responsibility (OBR) that her planned reforms will be enough to kickstart growth.
The sluggish performance of the manufacturing and construction sectors and the still-high inflation rate means the government faces an uphill battle.
While there are some positive signs, particularly in services and hospitality, the overall outlook suggests that the UK economy will continue to face difficulties in the months ahead. The next few months will determine whether the economy can bounce back or remain stuck in this flatlining pattern.
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