Closing post
Time to wrap up….
The UK economy flatlined in July, according to official figures, in grim news for Rachel Reeves as she gears up for a challenging budget.
It was a slowdown compared with June, when the economy grew by 0.4%, according to the Office for National Statistics.
GDP expanded strongly in the first half of the year, making the UK the fastest-growing economy in the G7, but it had been widely expected to slow in the second half.
The ONS said that growth in the services and construction sectors in July was offset by a 0.9% fall in the production sector, which includes manufacturing.
The downbeat data will raise questions about Labour’s promise to kickstart the economy.
A Treasury spokesperson said:
“We know there’s more to do to boost growth, because, whilst our economy isn’t broken, it does feel stuck. That’s the result of years of underinvestment, which we’re determined to reverse through our plan for change.”
More here:
In other news
Ocado’s shares have plunged 20% after its US partner, grocery giant Kroger, signalled a potential retreat from investment in automated warehouses.
US consumer confidence has dropped, on worries about job security and rising prices
Russia’s central bank has lowered interest rates by one percentage point, less than expected
Updated
Ocado shares end day down 20%
Oof! The London stock market has just closed, cementing a terrible day for Ocado.
Ocado’s shares have ended the day down 19.9%, at 240p, as City investors react to the news that its US partner Kroger was considering a potential retreat from investment in automated warehouses.
That knocks £500m off Ocado’s market value, as the company was worth just over £2.5bn at the start of the day.
Chris Beauchamp, chief market analyst at IG, says:
“It is hard to overstate how damaging this news is for Ocado. Kroger was one of the linchpins of its expansion strategy, and was a poster boy for the use of Ocado’s technology worldwide.
Others may now follow suit. Sadly Ocado has been a losing proposition for most investors over the course of its life as a listed company, with only a brief period in 2013/14 and then from 2018-2021 really delivering the goods. Today’s news casts a dark shadow over the company and its long-suffering investors.”
Updated
Back to earth with a bump for poor Ocado: pic.twitter.com/uccCpjsG2z
— Chris Beauchamp (@ChrisB_IG) September 12, 2025
US consumer sentiment hit by worries about jobs and prices
US consumer sentiment has fallen this month, as Americans worry about rising prices and a weakening jobs market.
The University of Michican’s index of consumer morale has declined to 55.4 from 58.2 in August; according to Bloomberg that’s the lowest reading since May.
Surveys of Consumers director Joanne Hsu reports that sentiment about the economy fell particularly strongly among lower and middle income consumers, adding:
Consumers continue to note multiple vulnerabilities in the economy, with rising risks to business conditions, labor markets, and inflation. Likewise, consumers perceive risks to their pocketbooks as well; current and expected personal finances both eased about 8% this month.
Trade policy remains highly salient to consumers, with about 60% of consumers providing unprompted comments about tariffs during interviews, little changed from last month. Still, sentiment remains above April and May 2025 readings, immediately after the initial announcement of reciprocal tariffs.
Consumer sentiment unexpectedly fell to an index value of 55.4 in September (est was 58.0), driven by a big decline in the future expectations component. pic.twitter.com/XCgxqRbaso
— Liz Thomas (@LizThomasStrat) September 12, 2025
Ocado shares slide after US partner warns on robotic warehouses
Shares in Ocado have now slumped even deeper into the red – down a hefty 17% today.
As flagged earlier, Ocado’s shares are under pressure after key customer Kroger, the US grocery giant, said it would undertake a site-by-site analysis of its automated fulfilment network. That has raised fears of weaker demand for its robotic warehouses.
Russ Mould, investment director at AJ Bell, comments:
Kroger also said it was using stores ‘very heavily’ to fulfil e-commerce orders and implied that was its key focus from now on.
“These comments imply that Ocado might find it harder to sell more automated solutions to Kroger, and that existing agreements might come under review. It’s the worst kind of news imaginable for Ocado investors as they’ve bought into a company which has positioned itself as the technology solution to grocery providers’ needs. While Ocado has continued to win new contracts, the pace has been erratic. The prospect of existing relationships starting to deteriorate adds another level of risk. Then there is the big question of when Ocado will ever make a sustainable profit.”
There’s a quiet start to trading on Wall Street, a day after stocks hit record levels.
The Dow Jones industrial average has dipped by 126 points, or 0.27%, to 45,982 points.
The broader S&P 500 share index is down just 3 points at 6,583 points, while the tech-focused Nasdaq has nudged up to an intraday record high.
The oil price has jumped today, as Russia faces more sanctions over the Ukraine war.
This morning, the UK government implemented 100 new sanctions designed to hit Russia’s revenues and military supplies, including against its so-called shadow fleet carrying oil and electronics companies.
US President Donald Trump has also threatened Moscow with new economic sanctions, saying that his patience with Russian President Vladimir Putin was “running out fast”.
Trump told Fox News:
“It’ll be hitting very hard on – with sanctions to banks and having to do with oil and tariffs also.”
Brent crude is up almost 2% today, at $67.65 per barrel.
A Ukranian drone attack on Russia’s northwestern port of Primorsk, which led to a suspension of oil loading operations overnight, is another factor.
Updated
The UK economy could get a boost next week, during Donald Trump’s state visit.
According to Bloomberg, the leaders of OpenAI and Nvidia plan to pledge support for billions of dollars in UK data centre investments when they head to the country next week, as part of Trump’s trip.
Sam Altman, the boss of ChatGPT maker OpenAI, and chipmaker Nvidia’s chief executive Jensen Huang are reportedly working with London-based data centre business Nscale Global Holdings on the project. More here.
The pound is sliding further against the US dollar.
It’s now lost almost half a cent, to $1.3525, as the dollar picks up against rival currencies.
Raffi Boyadjian, lead market analyst at XM, says this week’s political ructions could be weighing on sterling:
The pound is slightly underperforming today following a slump in UK industrial output in July.
Overall GDP growth was flat, but traders are more likely distracted by UK Prime Minister Keir Starmer’s repeated unsuccessful attempts at resetting his government, following two high-profile resignations recently.
NIESR predicts 0.4% growth in Q3
In better news for Rachel Reeves, the National Institute of Economic and Social Research have predicted the economy will grow in the current quarter.
Following this morning’s news that GDP was unchanged in July, NIESR estimate that UK GDP will rise by 0.4% in the July-September quarter. That would be slightly faster growth than the 0.3% recorded in the second quarter of this year.
NIESR says:
We expect GDP to grow by 0.4 per cent in the third quarter, as we forecast better monthly growth outturns for August and September. However, elevated uncertainty among businesses and households continue to pose downside risks to this forecast.
Fergus Jimenez-England, associate economist at NIESR, warns that economic activity in the third quarter will be constrained by fiscal uncertainty weighing on household and business sentiments, adding:
“Growth at this pace will do little to ease the fiscal challenges confronting the Chancellor this Autumn.”
⚡️OUT NOW⚡️ Our latest #GDP Tracker expect #UKGDP to grow by 0.4% in the third quarter 📈
— National Institute of Economic and Social Research (@NIESRorg) September 12, 2025
⬇️Read more here 📊⬇️#UKeconomy #gdpgrowth https://t.co/U504vvjFVF
Ocado shares fall 12% on Kroger worries
Back in the financial markets, shares in Ocado have slumped by 12% on fears that one of its key customers could be pulling back from automation.
Online grocery firm Ocado is the top faller on the FTSE 250 index of medium-sized companies, after US supermarket chain Kroger said it plans to conduct a site-by-site analysis of its automated fulfilment network.
This suggests Ocado might struggle to sell more automated solutions to Kroger, who has been an important customer in the past.
Neil Wilson, UK investor strategist at Saxo Markets, explains:
Last night on its earnings call, the US retailer, which is Ocado’s biggest partner for its warehouse automation technology, said it would take a “hard look” at some of its automated facilities and carry out a “full site-by-site analysis” of its existing network.
The comments are clearly a negative for Ocado as Kroger seems likely to move away from the kind of large CFCs provided by the British company and instead seems to be looking to lean on local stores to fill orders.
Back in 2018, Ocado’s shares soared after it announced a deal to provide its technology to Kroger – a breakthrough in its push to licence its services to grocers around the world.
TUC blasts Barclays chief over call to limit public sector pay rises
The TUC have hit out at the chief executive of Barclays for saying the UK government needs to limit pay rises for public sector workers
Barclays boss CS Venkatakrishnan told the Financial Times that the government needed to look at its own spending levels, including restricting rising “public sector” wages.
He argued:
“We need to curb expenditure at the government level.
We need to find a way to curb wage inflation.”
TUC General Secretary Paul Nowak has said in responcse that “the prize for the most tone-deaf comment of the year goes to C. S. Venkatakrishnan”, adding:
“This banking boss has some brass neck. It’s frankly insulting for him to call on nurses, teachers and paramedics to tighten their belts when he’s just pocketed a bumper pay rise.
“He seems to have conveniently forgotten we’re in the middle of a recruitment and retention crisis in our public services. That’s bad for the country and it’s bad for businesses.
Updated
Russia's central bank disappoints with 100bp rate cut
Over in Moscow, Russia’s central bank has cut interest rates by a whole percentage point, disappointing those who expected an even larger reduction.
The Bank of Russia has decided to cut its key lending rate by 100 basis points to 17.00%, down from 18%.
Economists surveyed by Bloomberg had expected a cut of 200 basis points.
Announcing the decision, the Bank points out that inflation is still running above its 4% target:
Underlying measures of current price growth have not changed significantly and generally remain above 4% in annualised terms.
The economy continues to return to a balanced growth path. Lending growth has accelerated in recent months. Inflation expectations remain high.
Goldman Sachs: Reeves 'very likely' to extend tax threshold freezes to 2030
Mel Stride is probably right when he says that tax rises in the autumn budget are all but certain.
Goldman Sachs has predicted that the government’s headroom against its deficit rule will decline by around £20bn, requiring either tax increases or spending cuts for the government to stick within its fiscal rules.
As a result, Goldman economist James Moberly says it is “very likely” that Rachel Reeves’s extends the existing tax threshold freezes for a further two years, up until 2030.
That would raise around £10bn, according to the IFS, as more workers would be dragged into higher income tax rates as their wages rise.
Moberly adds:
The government also has scope to raise significant additional sums from changes in pensions and property taxation, while the Chancellor could raise smaller sums from changes in gambling taxes or measures aimed at reducing tax avoidance.
UK public's long-term inflation expectations rise to highest since 2019
UK households’ inflation expectations have jumped, in a blow to the Bank of England in its battle to keep price pressures under control.
The central bank’s lates Inflation Attitudes Survey shows that households expect prices to rise 3.6% over the next 12 months. That’s up from 3.2% in May and the highest since August 2023.
In the longer term, the British public’s expectations for inflation in five years’ time rose to their highest since 2019 at 3.8% in August, up from 3.6% in May. That’s the highest reading since 2019.
Analysis: Stagnant July GDP shows scale of Reeves's challenge
Today’s UK GDP figures highlight the scale of the challenge for Reeves at her autumn budget, my colleague Richard Partington writes.
Some of the weakness can be explained away. Most economists had anticipated a slowdown after Britain recorded the strongest growth in the G7 in the first half of the year.
Manufacturers and exporters had rushed to beat the introduction of Donald Trump’s tariffs early in 2025. However, with US stockpiles now filled, and global uncertainty weighing on industry, new orders have slumped – reflected by a 1.1% plunge in manufacturing output in July.
Tax changes this spring had also pulled forward activity in the property market and influenced car sales, leading to more monthly volatility in the GDP numbers.
More here:
Shadow chancellor Mel Stride has said this morning:
“While the Government lurch from one scandal to another, borrowing costs recently hit a 27-year high – a damning vote of no confidence in Labour that makes painful tax rises all but certain.”
However…the rise in long-dated UK bond yields was also part of a global bond market move (arguably a vote of no confidence in many governments’ ability to achieve long-term fiscal sustainability).
And happily, those 30-year borrowing costs have fallen in the last week. After hitting a 27-year high of 5.75%, they’re now back down at 5.44%.
UK trade deficit widens
Britain’s trade gap with the rest of the world has widened, with exports to the US still weaker than before Donald Trump launched his trade war.
The latest trade data shows that the UK’s total goods and services trade deficit widened by £400m to £10.3bn in the three months to July 2025, because total imports rose by more than exports.
In July, goods imports rose by £2.7 billion, with a rise in imports from both EU and non-EU countries. Exports only increased by £1.9bn.
The Office for National Statistics also reports that exports of goods to the United States, including precious metals, rose by £800m in July 2025 to £4.7bn, but remain below their pre-tariff levels.
The total underlying trade deficit widened £0.4bn to £10.3bn in the 3-months to July 2025 because total imports rose by more than exports.
— Office for National Statistics (ONS) (@ONS) September 12, 2025
Read the article ➡️ https://t.co/zsYano6WZg pic.twitter.com/yOXNuipRmn
Business secretary Peter Kyle has said doing business with China is “desirable” and “unignorable” before he headed home to the UK after a two day trip to drum up business for exporters and Chinese investors.
After meeting the commerce minister Wang Wentao, Kyle said:
“China, because of its emerging economic status, isn’t just unignorable, it is also desirable to engage with”.
The UK said highlights of the trip including a meeting with Sandy Xu, the chief executive of JD.com, China’s largest retailer by revenue, “to discuss possible investment opportunities into the UK as well as opportunities for UK exporters into China”.
Ahead of the trip, Kyle said he hopes to bring back £1bn in business over the next five years for exporters.
Experts say this will do little to grow Britain’s economy, saying the trip was largely about reviving a trade relationship centring on a meeting between Kyle and Wentau who hosted the first UK-China Joint Economic and Trade Commission (Jetco) in seven years.
Kyle told Jetco:
“We meet as the global trading system faces significant strain; slower growth, supply chain disruptions, and geopolitical tensions. As major economies, we share a responsibility to strengthen a rules-based trading system that is predictable, fair, transparent, and fit for purpose.”
He added:
“We must also be candid where there are challenges. Businesses thrive on predictability and fairness, with transparent regulation and improved market access.”
A geeky aside: the Office for National Statistics has changed the way it presents UK GDP, to lead with changes across three-month periods, rather than the monthly change.
That could nudge the focus away from the volatile monthly data.
Kallum Pickering, chief economist at UK investment bank Peel Hunt, points out that monthly GDP data are “prone to heavy revision and should be taken with a pinch of salt”.
Ignore the headlines about stalling UK GDP. Note that if we just had the quarterly series, the result would be that Q1 was a beat at 0.7% QoQ (vs. 0.6% expected) and Q2 was a beat at 0.3% (vs. 0.1% QoQ). And no -ve revisions. The monthly series does more harm than good #ukgdp https://t.co/xLfo4FZ9YD
— Kallum Pickering (@KallumPickering) September 12, 2025
UK GDP QUICKTAKE
— Kallum Pickering (@KallumPickering) September 12, 2025
UK real GDP flatlined MoM in July following an outsized 0.4% MoM gain in June. The June print was in line with consensus expectations.
Looking at the data on a 3M/3M basis to abstract from the usual volatility that comes with the monthly GDP series, the UK… pic.twitter.com/QnNov0hSII
FTSE 100 heading towards record high
Share price are rising in London this morning, as the City shakes off the disappointing news that the UK economy stagnated in July.
The FTSE 100 index of blue-chip share has risen by 25 points, or 0.27%, to 9322 points in early trading. That lifts it close to the record high (9357 points) set in August.
Mining companies are among the top risers, with Fresnillo up 4% and Antofagasta gaining 2.4%.
The Footsie’s small rise comes amid a wider rally in global stock markets; America’s Dow Jones Industrial Average hit a record high on Thursday, and Japan’s Nikkei has ended at a record closing high today.
Investors are increasingly confident that the US central bank will cut interest rates several times in the coming months, to ward off a slowdown in America’s jobs market. Data yesterday showed a jump in applications for jobless benefits, suggesting a rise in layoffs.
Manufacturing output fell 1.1% in last quarter
Britain’s manufacturing sector contracted by over 1% in the last quarter, today’s GDP report shows.
The ONS reports that manufacturing output fell by 1.1% in the three months to July, which was a major cause of the 1.3% drop in wider production output.
There were also falls in electricity, gas, steam, and air conditioning supply (down 5.1%), and mining and quarrying (down 1.8%) in the three-month period.
Pound weakens after GDP report
The pound has weakened since today’s GDP report showed the UK economy failed to grow in July.
Sterling is down 0.2% at $1.355 against the US dollar this morning.
Kathleen Brooks, research director at XTB, points out there is “not much to like” from the July monthly GDP update, with zero growth in the economy at the start of the third quarter.
If the third quarter is not going to be a disaster for the UK economy, then growth in August and September will need to do the heavy lifting.
The pound is extending losses on this news and is eroding some of Thursday’s gains. For now, GBP/USD is hanging on to $1.3550, however, if bond yields start to rise on the back of this data, then we could see pound weakness later on Friday. The pound is the third worst performer in the G10 FX space so far today.
Updated
Treasury: UK economy 'does feel stuck'
The government is blaming “years of underinvestment” for the fact the UK economy feels like it is “stuck”.
Responding to this morning’s news that the economy stagnated in July, a HM Treasury spokesperson says:
“We know there’s more to do to boost growth, because, whilst our economy isn’t broken, it does feel stuck.
“That’s the result of years of underinvestment, which we’re determined to reverse through our Plan for Change. We’re making progress: growth this year was the fastest in the G7; since the election, interest rates have been cut five times, and real wages have risen faster than they did under the last government.
“There’s more to do to build an economy that works for, and rewards, working people. That’s why we are cutting unnecessary red tape, transforming the planning system to get Britain building, and investing billions of pounds into affordable homes, Sizewell C, and local transport across the country.”
“Stuck” appears to be Word of the Week in the Treasury. Yesterday, chancellor Rachel Reeves insisted the UK economy is “stuck, not broken”.
[which reminds me of Captain Blackadder’s line: We’re in the stickiest situation since Sticky the stick insect got stuck on a sticky bun….]
CBI: speculation about new business taxes is slowing growth
The CBI says uncertainty about the upcoming budget is hurting the economy too.
Ben Jones, CBI lead economist, says:
“The sunshine may have lifted consumers in July, but the broader economy stayed stuck in the shade. Growth was uneven across sectors, highlighting that underlying demand remains more fragile.
“Speculation about new business taxes is casting a long shadow. Amid rising cost pressures, firms are already holding back on hiring and investment and are wary of weeks more Budget uncertainty.
“The government cannot tax its way to growth and continue to raid corporate coffers. With the Autumn Budget fast approaching, the Chancellor must deliver a decisive, pro-growth package by committing to serious tax reform. It’s the structure of our system - from punitive business rates to the restrictive VAT threshold and stamp duty - that holds back economic progress, not just the rates themselves.”
Quilter: growth slowing due to Labour's NICs increase
Rachel Reeves’s tax rises in last year’s budget are hitting the economy, argues Lindsay James, investment strategist at financial services firm Quilter.
James cites the increase in the national insurance rates paid by employers, saying:
“After a positive first half of the year, UK economic growth is slowly grinding to a halt once again, with GDP failing to grow month-on-month in July, and slowing to just 0.2% on a three-monthly basis. This increase was driven primarily by the services and construction sectors, but production output fell by 1.3%. However, growth is slowing in these sectors and is likely the result of actions taken by the Labour government now being realised, with the increase in employer national insurance contributions having a significant impact on business confidence.
“With the summer now over and the economy supposedly getting out of its slumber, we now face continuing uncertainty in the lead up to the budget in November given the precarious position the Chancellor finds the public finances in. It is estimated that the fiscal hole that needs to be plugged is anywhere between £20bn and £50bn. While that is a wide range, it means one thing for a government that has shown it will struggle to cut spending – more tax rises.
“Speculation is already rife about which taxes will be raised, and without the ability to raise the main revenue generators – income tax, national insurance and VAT – the government is left with targeting multiple sectors for small amounts of revenue. This is increasing the headwinds for the UK economy and with still over two months to go, GDP readings for the second half of the year are unlikely to pretty reading. For government under as much pressure as it is at the moment, this will be a very difficult corner to get itself out of.”
Chart: three monthly GDP growth slowed again in July
Here’s a chart showing how growth has slowed, when looking at GDP over a three-month period:
ONS: production sector is falling back
ONS director of economic statistics Liz McKeown says:
“Growth in the economy as a whole continued to slow over the last three months. While services growth held up, production fell back further.
“Within services, health, computer programming and office support services all performed well, while the falls in production were driven by broad based weakness across manufacturing industries.
“In the latest month GDP showed no growth, with increases in services and construction offset by falls in production.”
Growth slowed to 0.2% over last three months
Today’s GDP report also shows that the UK economy grew by 0.2% in the three months to July 2025 compared with the three months to April 2025.
That’s a better measure than the rather volatile month-on-month changes to GDP.
That also shows the economy slowed, after recording three-month-on-three-month growth of 0.3% in June 2025 and 0.6% in May 2025.
Updated
UK GDP flat in July
Newsflash: UK economic growth ground to a halt in July.
GDP was unchanged in July, new data from the Office for National Statistics, just released, show.
Although that’s in line with City forecasts, it must be disappointing news for chancellor Rachel Reeves as she prepares the Autumn budget.
It means the economy slowed to a halt, compared with June when the economy grew by 0.4%, according to the ONS.
The stats body reports:
Services and construction both grew in July 2025, growing by 0.1% and 0.2% respectively, while production fell by 0.9% in July.
Updated
While we wait for the UK report….some of Britain’s biggest retailers are warning this morning that 400 large-format stores could close if the government forces large shops into its proposed higher business rates tax band.
The British Retail Consortium has calculated that there are 4,000 large-format retail stores with a rateable value of over £500,000, and estimated that one in 10 could be shut if they face higher business rates.
The BRC says:
The retail industry accounts for 5% of the economy yet pays over 20% of all business rates bills. This load is keenly felt by large stores (those with a rateable value of over £500,000), which pay around a third of retail’s total business rates bill.
Given the small profit margins that exist across retail (around 2-4% for food), a significant rise in rates for large stores would force these shops to raise their prices, employ fewer people, or even close their doors entirely.
Updated
Introduction: UK July GDP report coming up
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
Today we’ll learn how Britain’s economy fared at the height of the summer, when the first estimate of UK GDP in July is released in around 30 minutes, at 7am.
Economists predict that growth slowed, or worse, during July. The consensus forecast is that GDP was unchanged during in the month, a slowdown compared to June when the economy expanded by 0.4%.
City forecasts range from growth of 0.2% to a 0.2% fall in GDP during the month.
Thomas Pugh, chief economist at audit, tax and consulting firm RSM UK is in the growth camp, explaining:
Overall, the domestic economy is in better shape than it perhaps feels to businesses and consumers but this discrepancy in perception vs reality, or ‘vibecession’, is slowing growth; and we expect Friday’s GDP to show that the economy grew by 0.1% m/m in July despite some headwinds from NHS strikes and a weak construction sector.
The upshot is that behind the headlines, July’s GDP data is likely to show that the economy continued to recover over the summer after April’s barrage of taxes and tariffs.
But…. Deutsche Bank’s chief economist, Sanjay Raja, expects a small reversal in GDP in July:
After a surprisingly stronger Q2-25, where the UK claimed the fastest growth rate among G7 economies, all signs point to a slowdown in economic activity in the second half of the year. A course correction in trade-fronting, stockpiling, net acquisitions of precious metals, and public sector spending, we think, will see UK GDP growth slow into H2-25.
What do we expect in July? Our nowcast models point to a 0.1% m-o-m contraction to start the summer – though we see some upside risks given the timing of the Euro finals. Overall, however, we see all three key sectors in the UK declining.
The agenda
7am BST: UK GDP report for July
7am BST: UK trade report for July
11.30am BST: Russia interest rate decision
3pm: US consumer confidence survey from the University of Michigan
