The UK economy shrank surprisingly sharply in July as retailers and construction projects were knocked by wet weather, sparking fresh fears of a recession.
Economists had forecast a 0.2 per cent decline in gross domestic product (GDP) for July – but official data shows it contracted by 0.5 per cent.
The bigger-than-expected slump came after a 0.5 per cent growth in June. Economists said that Britain was “walking a tightrope” after the shock setback.
Labour said it was another “dismal day” for the economy – but chancellor Jeremy Hunt insisted that there were “reasons to be confident” about the future.
Mr Hunt, who has promised to half inflation by the end of 2023, said: “Only by halving inflation can we deliver the sustainable growth and pay rises that the country needs.”
The chancellor added: “We were among the fastest in the G7 to recover from the pandemic and the IMF have said we will grow faster than Germany, France, and Italy in the long term.”
Labour’s Rachel Reeves, shadow chancellor, said: “Today is another dismal day for growth, and the British economy remains hostage to the Conservatives’ low growth trap that is leaving working people worse off.”
The Liberal Democrats’ Treasury spokesperson Sarah Olney said Tory “mismanagement” of the economy was now a “burden on any chance of growth”, adding: “Rishi Sunak has utterly failed to get a grip on the cost of living crisis.”
Darren Morgan, ONS director of economic statistics, said that despite the fall in GDP “the broader picture looks more positive, with the economy growing across the services, production and construction sectors in the last three months”.
He pointed to the imact of NHS strikes as well as wet weather. “In July, industrial action by healthcare workers and teachers negatively impacted services, and it was a weaker month for construction and retail due to the poor weather.
The expert added: “Manufacturing also fell back following its rebound from the effect of May’s extra bank holiday.”