Struggling UK economy clawed back ground with 0.2% growth in July… but bank holiday for Queen’s funeral could knock £2bn off GDP
- UK economy grew by 0.2 per cent in July, lower than the 0.4 per cent expected
- Performance will raise fresh fears as country teeters on the brink of recession
- Concerns that the bank holiday for the Queen’s state funeral will hit activity
- Full coverage: Click here to see all our coverage of the Queen’s passing
The economy struggled claw back ground with 0.2 per cent growth in July, official figures revealed today.
The performance will raise fresh fears about the health of UK plc as analysts had pencilled in a 0.4 per cent bounceback after a 0.6 per cent slide the previous month.
There are also concerns that a bank holiday to mark the Queen’s state funeral will knock £2billion off GDP.
The challenge facing fledgling PM Liz Truss is set to be laid bare this week with a raft of data on the economy.
Ms Truss has already acted to address the cost of living squeeze by announcing a £150billion government package to freeze soaring energy bills.
The economy struggled claw back ground with 0.2 per cent growth in July, official figures revealed today
That should ease the pressure on households and might even avert a recession – while adding to the UK’s debt mountain.
However, the Office for National Statistics is expected to report on Wednesday that inflation remains at a 40-year high – with the headline CPI rate rising to 10.2 per cent in August from 10.1 per cent in July.
The ONS said the services sector was the biggest contributor to the recovery in July, growing by 0.4 per cent.
That followed a 0.5 per cent drop in the sector between May and June.
However, both production and construction dipped in July, by 0.3 per cent and 0.8 per cent respectively – the second consecutive month of contraction.
June’s GDP figure was impacted by the Queen’s Jubilee bank holiday day.
Next Monday’s bank holiday could present a new snag for the economy. Simon French, at Panmure Gordon, told The Sunday Times that previous one-off bank holidays had lowered output by up to £2billion.
Panmure Gordon thinks it will mean that, rather than growing by 0.1 per cent, the economy will shrink by 0.1 per cent in the current third quarter.
However, experts at Investec said the Queen’s Platinum Jubilee Bank Holiday had a less severe economic impact.
French said: ‘There are few parallels. We may not simply be talking about an extra bank holiday. There could be a prolonged period of national mourning.’
Some businesses closed for a day after the Queen’s death last week while sport and entertainment events were affected.
The challenge facing fledgling PM Liz Truss (pictured) is set to be laid bare this week with a raft of data on the economy
The fresh dent to economic activity threatens to create a renewed obstacle to an economy already hit by the cost of living squeeze.
Pay is falling at a record rate in real terms – because while wage packets may be rising they still lag behind prices.
Separate labour market figures tomorrow will show whether the gap has widened even further.
But Truss’s big-spending intervention should mean the pain starts to abate as inflation eases. Some economists think it will already have peaked.
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