Credit, Collections & Insolvency News
The UK economy unexpectedly failed to grow for the second month running in July with quarterly growth of 0.5% after also flatlining in June, according to the Office for National Statistics (ONS).
The monthly result reflects a modest rise in services output which was more than offset by declines in both Production and Construction
Anna Leach, Chief Economist at the Institute of Directors, said “The economy was disappointingly flat in July, against expectations of growth. Although sporting events helped lift activity in consumer-facing sectors, declines in otheR sectors wiped out overall growth.
“Consumer spending this year should continue to be supported by some headwinds having abated, particularly inflation and interest rates, as well as beneficial tailwinds from strong household balance sheets and low unemployment. The outlook for business investment, however, is rather more uncertain.
“It is important that the forthcoming Budget delivers a strong and positive message on growth. To reinforce business confidence to grow and invest, businesses need a predictable and efficient tax system, and growth-supporting policies. The forthcoming business tax roadmap and industrial strategy should help provide some of the necessary confidence to business, and we look forward to engaging on the detail.”
Arun Singh, Global Chief Economist at Dun & Bradstreet said “The UK’s flatlining economy for a second consecutive month comes as both a surprise and a warning that the second half of this year is likely to be tougher than the first half, when growth in the UK outpaced any other G7 economy. The stalling economy points to persistent fragility within key sectors, notably manufacturing and construction, which continue to struggle.
“While the Bank of England’s policy rate of 5% remains relatively high, interest rates have reached a turning point following the first rate cut in August. We are expecting further rate cuts, but not until later in the year. There is a need to stimulate demand, support liquidity, and foster business confidence to create an environment conducive to both business investment and consumer spending.
“For the financial sector, the stagnant economy and the upcoming autumn Budget heighten uncertainty. Businesses and investors alike are likely to be reconsidering their strategies and remain vigilant in their credit risk strategies. They need to make sure that they invest in the right tools and knowledge in order to make smarter decisions. By having quality data insights, companies can assess both risk and growth opportunities, thus future-proofing fiscal pipelines and bolstering business resilience.”
Suren Thiru, ICAEW Economics Director said “These figures confirm that the UK economy struggled for momentum in the aftermath of the general election as falling manufacturing and construction output caused overall activity to flatline in July.
“The UK’s growth trajectory should slow further in the coming months with higher energy bills and expected tax rises likely to trigger renewed restraint in spending and investment, despite a boost from subdued inflation.
“Despite these downbeat figures, a September rate cut is not certain given that some rate setters are still sufficiently nervous over lingering price pressures to delay loosening policy again, at least until November.”
