UK Economy Stalls, Dealing Blow To New Government

Britain's economy stalled again in July, official data showed Wednesday, dealing a blow to the new Labour government that has put growth expansion at the top of its priority list.

Gross domestic product showed zero growth in the reported month compared with June, when output also flattened, the Office for National Statistics (ONS) said in a statement.

Analysts had predicted a slight uplift in growth for July, while previous data showed the UK economy grew at a slightly slower pace in the second quarter compared with the first.

Prime Minister Keir Starmer's Labour government won power at the start of July, ending 14 years of Conservative rule.

"I am under no illusion about the scale of the challenge we face and I will be honest with the British people that change will not happen overnight," finance minister Rachel Reeves said in response to Wednesday's data.

"Two quarters of positive economic growth does not make up for fourteen years of stagnation.

"That is why we are taking the long-term decisions now to fix the foundations of our economy," she added in a statement.

Chancellor of the exchequer Reeves has pledged to impose "iron discipline" over public finances to claw back what she says is a GBP22-billion ($29-billion) black hole inherited from the previous Conservative government.

She has indicated that some taxes will be raised in her maiden budget at the end of October to help fund the gap.

The government has already announced a plan to end fuel benefits for millions of pensioners.

The government was boosted by news that US tech giant Amazon is to invest GBP8 billion ($10.5 billion) in Britain over the next five years, creating thousands of jobs via its web services arm

"We are taking the long-term decisions now to fix the foundations of our economy, including today's announcement... from Amazon Web Services, that will help rebuild Britain and make every part of the country better off," Reeves added.

The investment -- to build, operate and maintain data centres in the UK -- could contribute GBP14 billion to the country's GDP and support more than 14,000 jobs annually across the supply chain, Amazon said.

The government "persuading players like Amazon to continue to invest in tech services is a sound strategy", noted Danni Hewson, head of financial analysis at AJ Bell.

"But with so many rumours swirling about next month's budget, getting more businesses to inject cash into the UK will require a deft hand."