The UK economy's momentum stalled in July, with Gross Domestic Product (GDP) showing no growth, according to the latest figures from the Office for National Statistics (ONS). The data has prompted calls from leading business organisations for the government to shift its focus from taxation to pro-growth policies ahead of the Autumn Budget.

The ONS report indicates that monthly GDP was flat in July, following a 0.4% increase in June. Over the three months to July, the economy grew by a modest 0.2%. This performance was driven by a slight rise in the services sector (0.1%) and construction (0.2%), which were offset by a 0.9% fall in production output.

The subdued figures have led to widespread concern among business groups.

Jonathan Moyes, Head of Investment Research at Wealth Club, noted: "After seeing a strong beat for GDP in June, surprisingly strong retail sales figures and upbeat survey data over the summer, optimists would be forgiven for thinking the UK economy was defying the doubters. That wasn’t to be this month, the UK economy is firmly back in the slow lane."

Ben Jones, Lead Economist at the Confederation of British Industry (CBI), described the situation as "uneven" and highlighted the fragile nature of underlying demand. "The sunshine may have lifted consumers in July, but the broader economy stayed stuck in the shade," he said.

Business Leaders Warn Against Further Tax Rises

The consensus among business leaders is that the government must take a new approach to stimulate growth. Both the CBI and the British Chambers of Commerce (BCC) have warned that speculation about new taxes is hindering business confidence, investment, and hiring decisions.

Stuart Morrison, Research Manager at the British Chambers of Commerce, said: "The business landscape remains challenging, particularly for SMEs, with cost pressures impacting investment, recruitment and trade. Inflation is proving stubborn, meaning for businesses struggling with the cost of borrowing, the pace of further interest rate cuts is likely to be slower than expected."

He added that the government's message "is now clear - there must be no more taxes on business in the Autumn Budget".

This sentiment is echoed by the CBI, which argued that "the government cannot tax its way to growth and continue to raid corporate coffers".

Business Rates Reform Welcomed, But More Needed

In a separate but related development, business groups have welcomed the publication of the HM Treasury's Business Rates Interim Report. The report, which aims to improve the tax system for businesses, has been seen as a positive step.

Liz Barclay, IoD Special Adviser for Small Business and Entrepreneurship, welcomed the Chancellor's "ambition to help our vital small businesses".

"Cliff edges impede growth as business leaders hold back from expanding so as to avoid the additional costs involved," she said.

Anna Leach, Chief Economist at the Institute of Directors (IoD), commented: "The economy drifted in July, although much as expected, following stronger than expected growth last month. Growth has been volatile recently stoked by tariffs, VED and stamp duty changes, meanwhile good weather and sporting events are believed to have given consumer spending a lift in July."

She stressed that while growth has been better than feared this year, the underlying challenges remain, and the upcoming Budget must deliver a "convincing growth plan".