Britain's economy recorded zero monthly growth in July after a sharp drop in factory output, in line with expectations for a slower start to the second half of 2025.
UK manufacturing output - which makes up 9% of the economy - dropped by a hefty 1.3% on the month with declines across various types of production, led by computers, electronics and pharmaceuticals, the Office for National Statistics said.
But the much larger services sector edged up 0.1% on the month, slightly ahead of expectations. GDP had risen 0.4% in June.
"July's slowdown is probably the start of a more restrained period for the economy with higher inflation and rising job losses likely to have stifled activity in August, despite an expected uplift from the warm weather," said Suren Thiru, economics director at the ICAEW accountancy body.
Sterling was slightly weaker after the data, though Thiru said he did not expect the Bank of England to cut rates again after next week's meeting as inflation looked on track to rise further above the bank's 2% target.
Britain's economy grew robustly by its recent standards in the first half of 2025, expanding by 0.7% in the first quarter of the year and 0.3% in the second - partly due to higher government spending and exporters trying to ship goods before the imposition of US tariffs.
On an annual basis, gross domestic product in July was 1.4% higher than a year earlier - unchanged from June's annual growth rate but a shade lower than the 1.5% growth forecast in a Reuters poll, official figures showed.
But economists expect slower growth in the second half as tariffs weigh on global demand and Britain's labour market weakens. Last month, before the release of second-quarter data, the Bank of England forecast annual growth of 1.25% for this year well below the average of 2% between 2010 and 2019.
Finance minister Rachel Reeves said yesterday that Britain's economy "isn't broken, but it does feel stuck".
She hopes that pro-growth measures in the run-up to her annual budget on November 26 will lead to a more favourable assessment of Britain's prospects from the Office for Budget Responsibility.
But some businesses say they are keeping hiring and investment plans on hold, as they await details of tougher employment legislation and whether they will be the main target again for tax rises.
