Official data released on Wednesday revealed that Britain's economy stagnated once more in July, dealing a significant setback to the newly elected Labour government, which has prioritized economic growth expansion. According to the Office for National Statistics (ONS), the country's gross domestic product (GDP) showed no growth in July compared to June, when output also remained flat. Analysts had anticipated a slight increase in growth for July, while earlier data indicated that the UK economy grew at a marginally slower rate in the second quarter compared to the first.
Prime Minister Keir Starmer's Labour government assumed power at the beginning of July, marking the end of 14 years of Conservative rule. In response to the latest economic data, Finance Minister Rachel Reeves acknowledged the substantial challenges ahead, stating, "I am under no illusion about the scale of the challenge we face and I will be honest with the British people that change will not happen overnight." She further emphasized, "Two quarters of positive economic growth does not make up for fourteen years of stagnation. That is why we are taking the long-term decisions now to fix the foundations of our economy."
Reeves has vowed to enforce "iron discipline" over public finances to address a £22-billion ($29-billion) fiscal deficit inherited from the previous Conservative government. She has hinted at potential tax increases in her upcoming budget at the end of October to help bridge the gap. Additionally, the government has already outlined plans to terminate fuel benefits for millions of pensioners.
The government received a boost with the announcement that US tech giant Amazon plans to invest £8 billion ($10.5 billion) in Britain over the next five years, creating thousands of jobs through its web services division. Reeves highlighted this investment, stating, "We are taking the long-term decisions now to fix the foundations of our economy, including today's announcement... from Amazon Web Services, that will help rebuild Britain and make every part of the country better off." Amazon's investment, aimed at constructing, operating, and maintaining data centers in the UK, is expected to contribute £14 billion to the country's GDP and support over 14,000 jobs annually across the supply chain.
Danni Hewson, head of financial analysis at AJ Bell, noted that "persuading players like Amazon to continue to invest in tech services is a sound strategy." However, she cautioned, "With so many rumours swirling about next month's budget, getting more businesses to inject cash into the UK will require a deft hand."
