THE UK economy has showed no growth in July.
The latest figures from the Office for National Statistics (ONS) reveal Gross Domestic Product (GDP) is estimated to have shown no growth at the peak of the summer.
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This follows a growth of 0.4% in June 2025 and a fall of 0.1% in May 2025.
GDP is one of the main indicators used to measure the performance of a country’s economy.
When it goes up, it means the economy is doing well. When it falls, it means the economy has shrunk.
It comes after analysts had expected the month-on-month reading to come in at 0%, and on a yearly basis the economy was predicted the grow 1.1% up from 0.2% in June.
Wages and inflation data will also be released next week, all of which will be looked at closely by the BoE ahead of policy meeting next Thursday.
Investors will also be looking at the data, worried the Labour Government may struggle to balance the books after a tumultuous time for gilts in the past few weeks. I
Chancellor Rachel Reeves is also preparing to deliver the autumn Budget on November 26
It’s worth bearing in mind these latest quarterly figures are estimations and are open to be revised at a later date.
What it means for your money
GDP measures the economic output of companies, individuals and Governments.
If it is rising steadily, but not too much, it’s a sign of a healthy and prosperous economy.
This is because it usually means people are spending more, the Government gets more tax and businesses get more money which then means pay rises for workers.
When GDP is falling, it means the economy is shrinking which can be bad news for businesses and workers who face pay cuts or even losing their job.
The Bank of England (BoE) also uses GDP and inflation as key indicators when determining the base rate.
This decides how much it will charge banks to lend them money and is a way to try to control inflation and the economy.
If GDP is low, the BoE cuts its base rate in order to encourage people to spend and invest money.
If it is higher, the BoE may keep its base rate higher in order to keep inflation in check.
What is the base rate and how does it affect the economy?
NINE members of the Bank of England’s Monetary Policy Committee meet eight times each year to set the base rate.
Any change to the Bank’s rate can have wide-reaching consequences as it directly influences both:
- The cost that lenders charge people to borrow money
- The amount of savings interest banks pay out to customers.
When the Bank of England lowers interest rates, consumers tend to increase spending.
This can directly affect the country’s GDP and help steer the economy into growth and out of a recession.
In this scenario, the cost of borrowing is usually cheap, and the biggest winners here are first-time buyers and homeowners with mortgages.
But those with savings tend to lose out.
However, when more credit is available to consumers, demand can increase, and prices tend to rise.
And if the inflation rate rises substantially – the Bank of England might increase interest rates to bring prices back down.
When the cost of borrowing rises – consumers and businesses have less money to spend, and in theory, as demand for goods and services falls, so should prices.
The Bank of England is tasked with keeping inflation at 2%, and hiking interest rates is a way of trying to reach this target.
In this scenario, the losers are those with debt.
First-time buyers will lose out to cheaper mortgage rates, and those on tracker or standard variable rate mortgages are usually impacted by hikes to the base rate immediately.
Those on a fixed-rate deal tend to be safe if they fixed when interest rates were lower – but their bills could drastically increase when it’s time to remortgage.
The cost of borrowing through loans, credit cards and overdrafts also increases when the base rate rises.
However, the winners in this scenario are those with money to save.
Banks tend to battle it out by offering market-leading saving rates when the base rate is high.
