Striking workers and wet weather caused the economy to shrink sharply in July

Punishing strikes by NHS workers and teachers caused the economy to shrink sharply in July, according to new figures.

Wet weather also hit the construction and retail industries causing the economy to contract by 0.5 percent.

The Office for National Statistics (ONS) figures were worse than analysts had predicted.

It is the heaviest decline since December last year and comes amid concerns recent interest hikes and persistent inflation could stifle economic growth.

But the ONS said the “broader picture” for the country looked “more positive”.

READ MORE UK officially in the red as GDP drops 0.5% as interest rates batter Britain

July’s figure followed a 0.5 percent increase the previous month.

It comes ahead of a key Bank of England meeting next week, when members of the monetary policy committee will vote on whether to push up interest rates.

Many economists expect another hike from the current rate of 5.25 percent to 5.5 percent in their efforts to grapple inflation.

Chancellor Jeremy Hunt pointed to recent revisions showing the UK recovery from Covid was one of the fastest in the G7 – rather than the slowest as had previously been thought.

“Only by halving inflation can we deliver the sustainable growth and pay rises that the country needs,” he said.

“But there are many reasons to be confident about the future. We were among the fastest in the G7 to recover from the pandemic and the IMF (International Monetary Fund) have said we will grow faster than Germany, France and Italy in the long term.”

ONS director of economic statistics Darren Morgan said: “Our initial estimate for July shows that GDP fell; however, the broader picture looks more positive, with the economy growing across the services, production and construction sectors in the last three months.

“In July, industrial action by healthcare workers and teachers negatively impacted services, and it was a weaker month for construction and retail due to the poor weather.

“Manufacturing also fell back following its rebound from the effect of May’s extra bank holiday.”

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The ONS said all three key areas of the economy – services, construction and production – declined.

James Smith, developed markets economist at ING, said a recession – which means two consecutive quarters of decline – “can’t be ruled out”.

He said: “Cutting through the noise, the economy seems to be still growing, albeit fractionally. The change in activity over the past three months relative to the three months before is still slightly positive. We think the economy is likely to more or less flatline over coming quarters – and a mild recession can’t be ruled out.”

Labour’s shadow chancellor Rachel Reeves said: “Today is another dismal day for growth, and the British economy remains hostage to the Conservatives’ low growth trap that is leaving working people worse off.

“After thirteen years of instability, the Conservatives have left the British economy weaker and families having to cope with higher taxes, higher mortgages and higher food and energy bills.”

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