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Industrial Action and Poor Weather Blamed for UK GDP Decline

The UK economy has been negatively affected by doctor strikes in July, while the retail sector showed lower output due to wet weather.

The UK economy has been negatively affected by doctor strikes in July, while the retail sector showed lower output due to wet weather.

The monthly gross domestic product (GDP) figures for July recorded a 0.5 percent drop in services, production, and construction.

The services sector, which includes health and social work, saw a 0.5 percent drop in July and was the main contributor to the fall in GDP for the month overall.

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The Office of National Statistics (ONS) attributed this to the impact of industrial action held by NHS senior doctors and radiographers, as well as junior doctors.

Senior doctors went on a two-day strike in July over the ongoing pay dispute with the government. This followed five days of strikes by junior doctors, which was the longest industrial action in the history of the health care service.

The end of July also saw radiographers go on strike for two days after unsuccessful discussions with the government.

Patients missed more than 167,000 appointments and procedures because of the senior and junior doctor strikes and the GDP health sector fell by 2.1 percent.

Teachers also went on a strike in July for two days after rejecting the government’s salary rise offer in April. Rail workers took three days of strikes, which saw 20,000 members from 14 train operating companies walk out.

The ONS said that “notable industrial action was an important factor” leading to the monthly decline in these industries.

Retail and Construction

Retail sales suffered from heavy rainfall in July. The Met Office reported it to be the wettest July since 2009.

This contributed to a 1.2 percent drop in sales volumes, said the ONS, compared to a rise of 0.6 percent in June. August brought much-anticipated relief for retailers, with sales bouncing back after the momentum lost in July.

Poor weather also affected output in construction, where businesses saw a 0.5 percent decrease.

“This follows a 1.6 percent increase in June 2023, where businesses told us that extremely good weather and an additional working day, compared with May, because of the additional bank holiday for King Charles III coronation, had boosted output,” the ONS reported.

Another sector that contributed negatively to the July GDP was production, where the output fell by 0.7 percent.

Business slowed for rubber and plastic, and computer and electronics manufacturers. Meanwhile, machinery and equipment manufacturers enjoyed an increase of 2.8 percent.

Broader Picture

Despite the monthly decline in many industries, the broader GDP picture remained more positive. In the three months to July, GDP increased by 0.2 percent with growth in all production, construction, and services.

The economy seems to be still growing, albeit fractionally, said James Smith, developed markets economist at the ING group.

“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,” Mr. Smith said.

It comes ahead of a Monetary Policy Committee meeting, where the Bank of England will vote on interest rates. The rates are expected to increase from 5.25 percent to 5.5 percent in an effort to keep up with the historically high inflation.

Apart from the inflationary pressures, the UK economy is set to be affected by another wave of industrial action this autumn. September has kicked off with train and train driver strikes, forcing rail companies across England to cancel all services.

The British Medical Association has announced that in September and October, junior doctors and consultants will hold a joint strike for the first time in the history of the NHS.

Health secretary Steve Barclay called on the BMA to end the industrial action in a Sept. 4 post on X, formerly known as Twitter, adding that it harms the patients and the health care service.

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