BUSINESS LIVE: UK economy shrinks 0.5% in July

London-listed shares are trading lower this morning, thanks to new ONS data showing economic output shrank at the fastest pace in July this year, raising concerns about a recession.

Ben Laidler, analyst at eToro:

‘These latest GDP figures are worse than expected, with growth depressed by strikes and consumer pressure. These are the weakest data we have seen this year and are likely to reignite fears of stagflation as the economy stagnates and inflation sits at a world-leading 6.8%.

“The services sector, which makes up a dominant 80% of the economy, led the fall. Driven by strikes in healthcare and education, while retail led the weakness in the consumer sector, the cost of living crisis continued to take its toll.

“The economy is stagnant, narrowly escaping recession and up just 0.2% in the past three months, but still faces strong inflation headwinds. This puts the Bank of England in a difficult position as it considers raising interest rates further.”

Wilko staff were given a glimmer of hope last night when the owner of Poundland struck a deal to buy dozens of his closing stores.

As the shutters came down for the final time on the first 24 of the High Street retailer’s 398 stores, Pepco agreed to buy 71, which could save jobs.

Thomas Pugh, economist at RSM UK:

‘The UK economy shrank by 0.5% in July, completely reversing the 0.5% increase in June. However, more than half of the decline was related to strike action in the healthcare, education and transport sectors. Meanwhile, consumers focused on entertaining themselves and their children during the exceptionally wet July, causing output in the arts, entertainment and recreation sectors to soar, no doubt helped by the Barbenheimer effect.

“The big picture is that growth is still flat. 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 could support the MPC after a 25 basis point rise next week.

‘Overall, the MPC is unlikely to be particularly moved, even though today’s data is in the ballpark supporting rates peaking soon, as strike action and exceptionally wet weather cloud the picture. Next week’s inflation data will likely be more important. But we think the most likely outcome next week is another 25 basis point increase, followed by a pause.”

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

In a move that stunned the energy sector and the city, the 53-year-old immediately resigned, sparking the hunt for a replacement at one of Britain’s biggest companies.

BP said Looney – who was paid £10 million last year – “accepts that he was not fully transparent” when questioned about relationships with colleagues.

Marcus Brookes, Chief Investment Officer at Quilter Investors:

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

‘Secondly, with the election campaign just around the corner, the state of the economy will undeniably be central.

‘Britain’s unique economic circumstances, combined with global pressures, leave the country in a precarious situation, with some even sounding alarm bells about a possible recession in 2024.’

The British economy contracted 0.5% in July after a summer dip and weeks of strikes, sparking fears of a ‘mild recession’ later this year.

Data from the Office for National Statistics (ONS) today shows that gross domestic product (GDP) shrank more than the 0.2% decline economists had predicted.

This came after a monthly increase of 0.5% in June.

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

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

“Either way, it suggests that higher interest rates and persistent inflation are having a bigger impact on the economy. All eyes will be on the Bank for the announcement of the interest rate decision.’

The British economy shrank by a larger-than-expected 0.5 percent in July as strikes at hospitals and schools hit output, new data from the Office for National Statistics shows.