The UK economy shrank by 0.5 per cent in July, following growth of 0.5 per cent the previous month.
Experts have warned the latest gross domestic product figures sound the alarm bells for a recession on the horizon.
The latest data, published by the Office for National Statistics (ONS), showed industrial action by healthcare workers and teachers negatively impacted services and poor weather also meant it was a weaker month for construction and retail.
Marcus Brookes, chief investment officer at Quilter Investors, said the latest data shows the economy is “buckling” under the strain of interest rate increases.
He said: “As the UK stands at this economic crossroad, two things are clear. Firstly, today’s data will be critical in challenging the country's economic perceptions and will play a big role in the Bank of England’s future decisions.
“Secondly, with the election campaigning period looming, the state of the economy will undeniably take centre stage.
“The UK's unique set of economic circumstances, coupled with global pressures, means that it remains on a precarious edge, with some even sounding the alarm bells for a potential recession in 2024.”
Neil Birrell, Premier Miton chief investment officer, also thought it could be a sign a recession is coming.
He said: “The UK economy shrank 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 their meeting to discuss interest rates, although the speed of the slowdown could be indicating that recession is around the corner.
“Either way, it does suggest that higher interest rates and sticky inflation are having a more significant effect on the economy. All eyes will be on the Bank for the announcement of the rate decision.”
The Bank of England is set to announce its latest interest rates next week.
John Glencross, CEO of Calculus, said there needs to be more support provided for SMEs.
He added: “Today’s GDP data reflects a sluggishness surrounding the UK economy.
“While a technical recession remains at arm’s length, the challenging economic environment persists. We are, however, encouraged by the recent and significant revision of historical growth which changes the picture of the immediate post-pandemic recovery, notably compared to our European neighbours.”
tara.o'connor@ft.com
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