The United Kingdom’s economy flatlined in July 2025, registering zero month-on-month growth and signalling a worrying slowdown as the nation heads towards the crucial Autumn Budget. Official figures from the Office for National Statistics (ONS) revealed that the Gross Domestic Product (GDP) remained unchanged, a stark contrast to the 0.4% growth seen in June and indicating a loss of momentum after a stronger first half of the year.
In response to the subdued economic data, the British Chambers of Commerce (BCC) has issued an urgent plea to the government: “there must be no more taxes on business in the Autumn Budget”. The BCC highlighted that small and medium-sized enterprises (SMEs) are currently facing significant challenges due to cost pressures impacting their investment, recruitment, and trade operations. Stuart Morrison, Research Manager at the BCC, commented that while this year’s economic forecast suggests 1.3% growth, it is largely bolstered by strong activity in the first quarter, prior to the full impact of national insurance contributions and tariffs being felt.
Production Sector Dragging Growth
The flat July GDP figure is largely attributed to a sharp contraction in the production sector, which fell by 0.9% in the month. Manufacturing, a key component of this sector, saw its output decline by 1.3%, marking the steepest fall since July 2021. This broad-based weakness across manufacturing industries, with nine of the thirteen subsectors reporting declines, offset modest growth in the services sector (up 0.1%) and construction (up 0.2%).
Stubborn Inflation Fuels Cost Concerns
Adding to the economic challenges, inflation in the United Kingdom climbed to 3.8% in July 2025, the highest rate seen since January 2024. This resurgence, driven by rising transport costs, particularly airfares and motor fuels, remains well above the Bank of England’s 2% target. The persistent inflation is likely to keep the Bank of England’s Monetary Policy Committee cautious, with interest rates expected to remain on hold at 4%, potentially delaying further rate cuts and prolonging the period of higher borrowing costs for businesses.
Widening Trade Deficit and International Headwinds
The UK’s trade performance in July also presented a mixed picture. The trade in goods deficit widened to £61.9 billion in the three months to July, as imports outpaced exports. While goods exports to the United States saw an increase of £0.8 billion in July, they still remain below pre-tariff levels, indicating the ongoing impact of global trade disruptions.
Political Repercussions and Government Response
The economic stagnation has intensified scrutiny on Chancellor Rachel Reeves and the Labour government as they prepare for the Autumn Budget. A Treasury spokesperson acknowledged that the economy “does feel stuck” and cited “years of underinvestment” as a primary cause, vowing to reverse this trend through a “plan for change”. However, opposition parties have sharply criticised the government’s handling of the economy. The Conservative party stated that the current economic strategy has “left Britain poorer,” while Reform UK claimed Labour is “bankrupting Britain”. Shadow Chancellor Mel Stride also suggested the government is “distracted from the problems the country is facing”.
Business Calls for Tax Freeze Amid Ongoing Pressures
The BCC’s straightforward message – “no more taxes on business” – reflects the significant financial strain on SMEs. Many businesses are experiencing elevated costs related to employment, inflation, and the lingering effects of previous tax measures. The current trending news underscores the critical need for the government to focus on policies that support growth and productivity, rather than introducing additional tax burdens that could hinder the United Kingdom’s economic recovery.
