BUSINESS LIVE: UK economy shrinks 0.5% in July

Thomas Pugh, economist at RSM UK:

‘The UK economy contracted 0.5% in July, completely reversing June’s 0.5% rise. However, more than half of the drop was related to strikes in the health, education and transportation sectors. Meanwhile, consumers focused on entertaining themselves and their children during the exceptionally wet July, which meant that production in the arts entertainment and recreation sector soared, no doubt helped by the Barbenheimer effect.

‘The general picture is that growth remains stagnant. We expect the economy to remain stagnant for the rest of the year, but there is a growing risk of a recession towards the end of this year or early 2024. This would support the MPC pausing after a 25 basis point increase next week.

‘Overall, although at the margin today’s data supports that interest rates will peak soon, the MPC is unlikely to be much moved as strikes and exceptionally wet weather cloud the outlook. Next week’s inflation data is likely to be more important. But we think the most likely outcome is a hike of more than 25 basis points next week and then a pause.’

BP was plunged into crisis last night by the shock resignation of chief executive Bernard Looney over personal relationships with staff.

In a move that shocked the energy industry and the City, the 53-year-old resigned immediately, triggering a search for a replacement at one of Britain’s biggest companies.

BP said Looney, who was paid £10m last year, “accepts he was not fully transparent” when asked about relationships with colleagues.

Marcus Brookes, chief investment officer at Quilter Investors:

‘As the UK finds itself at this economic crossroads, two things are clear. Firstly, today’s data will be instrumental in challenging the country’s economic perceptions and will play an important role in the Bank of England’s future decisions.

‘Secondly, with the election campaign period just around the corner, it is undeniable that the state of the economy will take center stage.

“The UK’s unique set of economic circumstances, coupled with global pressures, means it remains in a precarious situation, with some even raising alarm bells about a possible recession in 2024.”

The UK economy contracted 0.5% in July after a summer failure and weeks of strike action, raising fears of a “slight recession” later this year.

Data from the Office for National Statistics (ONS) today showed that gross domestic product (GDP) contracted at a sharper pace than the 0.2% drop economists had forecast.

It came after a 0.5% monthly increase in June.

Neil Birrell, Chief Investment Officer of Premier Miton and Manager of Premier Miton Diversified Growth Fund:

“The UK economy contracted much more than expected in July, with the services sector notably weak, which may be seen as good news by some, particularly the Bank of England ahead of its meeting to discuss interest rates.” interest, although the speed of the slowdown could be indicating that recession is just around the corner.

‘If anything, it suggests that higher interest rates and persistent inflation are having a more significant effect on the economy. All eyes will be on the Bank when the rate decision is announced.’

The UK economy contracted by a more than expected 0.5 per cent in July as strikes in hospitals and schools hit output, new data from the Office for National Statistics shows.