Quarterly growth reached 0.5%, driven by a modest rise in services output, which counterbalanced declines in both production and construction sectors.

The manufacturing and construction sectors, in particular, experienced setbacks, raising concerns for the new Labour Government’s growth agenda. The services sector showed resilience, with the health sector rebounding after June’s strike action.

Peter Arnold, EY UK chief economist, said: “Recent outturns demonstrate how noisy the monthly data can be. This, in turn, can also affect the quarterly figures, and though the economy should still grow at a decent pace in Q3 overall, quarter-on-quarter GDP growth is likely to be softer than the above-trend growth rates seen in the first two quarters of this year. However, the underlying pace of activity growth remains solid.

“The same is true for the growth outlook further ahead. Over the next eighteen months, the EY ITEM Club thinks quarterly GDP growth will be a bit weaker than the pace seen in H1 2024, reflecting the impact of tighter fiscal policy and the lagged passthrough of past interest rate rises.

“Nevertheless, the pace of growth should remain reasonably firm, due in large part to the EY ITEM Club’s view on the consumer outlook. With real household income growth remaining solid and consumer confidence continuing to improve, the EY ITEM Club expects consumer spending will make a stronger contribution to GDP growth moving forward.”

Kevin Brown, savings specialist at Scottish Friendly, added: “These figures will focus minds on the Monetary Policy Committee (MPC) that bringing rates down is the right move in order to ease pressure on businesses and households as we move into the winter.

“Inflation is largely on track, but with GDP showing signs of stalling over summer, it suggests that households, and the wider economy, are now feeling the effects of higher rates. If these rates don’t ease then we could see worse numbers in the near future – which could lead to a spike in unemployment.

“All eyes will now be on the Autumn Budget and what that may contain. Households will hope for fewer tough measures than have been predicted, particularly as the economy falters. It is important in this context for families to prepare for any event, which makes thinking about rainy day funds and long-term investing goals all the more important.”