Remind me, was there a big event at the start of that month? My memory is blurred. An election or something? A new political party in power, with a new economic strategy?
Something must have happened in July, because that was the point when the economy stopped going gangbusters, and hit stall speed instead.
In the first three months of the year the UK economy outpaced the rest of Europe, growing 0.7%. It added another 0.5% growth in the three months to June 30.
Then in July the fun stopped. The economy didn’t grow at all. It picked up by 0.2% in August, thankfully, but Luke Bartholomew, deputy chief economist at fund manager abrdn, said that already feels like “stale data… given the deterioration in business and consumer confidence since”.
So what might have caused this deterioration?
Bartholomew pins it on “speculation about the upcoming Budget”, which he fears “will cause an even more pronounced slowdown”.
Which is a polite way of blaming the new Labour government. And he’s not the only expert taking that view.
Rob Morgan, chief investment analyst at stockbroker Charles Stanley, also pinned the slowdown on politics stating: “With the government having spoken in cautious tones about the economy and warning of ‘difficult decisions’ around tax and spending, it is harder for businesses to retain confidence.”
Ah, now I remember what happened in July. Labour swept to power with a landslide, and new PM Keir Starmer and chancellor Rachel Reeves struck on the brilliant strategy of talking down the UK economy and scaring the nation stiff with talk of more austerity and brutal tax hikes.
Today’s figures show it’s having an impact. Labour is killing the economic recovery just as it was getting into gear and Reeves hasn’t even delivered her first Budget yet.
Morgan warns that Labour’s plans are undermining business investment and growth. He singles out Reeves’ latest tax wheeze, which is to raise £17billion by hiking National Insurance rates on employers.
This could trigger every kind of misery, including “businesses curtailing new hires, limiting pay rises, scaling back pension contributions, or else passing extra costs on in higher prices”.
Morgan added gloomily: “For some already-stretched small businesses an additional tax on employing workers could be the nail in the coffin.”
Way to go, Labour.
That’s only the start. As we report today, Reeves is threatening to double capital gains tax in a move that could crush the entrepreneurial spirit.
It could ultimately cost more tax than it raises.CGT revenues could fall by £2billion as a result, according to HMRC‘s own figures. Talk about killing the golden goose.
Alice Haine, personal finance analyst at Bestinvest, also slates Labour’s “doom-mongering about the state of the country’s finances” for sinking business and consumer confidence.
Starmer and Reeves have done untold damage through their childish ‘bash the rich’ strategy. Many are upping sticks and fleeing the country so they don’t have to deal with them any longer.
That’s fine, class warriors say. Let the greedy sods go. We don’t need them. The problem is, ordinary middle income taxpayers will have to plug the gap.
Even if Starmer and Reeves wake up to the danger and reverse course, the damage has already been done.
Wealthy people who have fled in panic won’t be returning. Foreigners who were looking to invest in the UK will be thinking twice.
The bond market is getting nervous, which is driving up UK borrowing costs and costing taxpayers billions a year in extra interest charges.
The Labour frontbench has got it all wrong.
Some kind of slowdown was expected in the second half of the year, but nothing as fast as this. Survey after survey has shown how the growth stopped pretty much as soon as Starmer and Reeves took power and opened their mouths. And they can’t pin this on the Tories.
