3 hours ago
2
The UK economy expanded by 0.1% in August, according to official figures, giving a lift to Rachel Reeves before next month’s crucial budget.
A boost from the manufacturing sector helped the economy improve along with a strong performance by the health sector.
However, the Office for National Statistics (ONS) said it had revised down July’s flatlining growth to a 0.1% contraction, limiting the rise in output over the three months to August to 0.3%.
Analysts said the UK’s economic outlook was likely to continue improving, but at a sluggish pace while businesses and consumers waited to see the outcome of the chancellor’s budget on 26 November.
The latest spat between Donald Trump and Beijing over tariffs will also add to uncertainty on international financial markets about the likely path of global trade.
The chancellor is weighing up raising funds from a series of tax rises in her autumn budget to close a £20bn-£30bn budget spending gap that has opened up this year.
The UK’s manufacturing industry reversed a 1.1% fall in July to grow by 0.7% in August, lifted by a strong increase in output by the pharmaceutical sector. The services sector, which covers about three-quarters of economic activity, flatlined for the second consecutive month.
The construction sector shrank in August by 0.3% month on month, with a decline in maintenance and repair work offsetting a 0.5% increase from new building work.
The GDP figures were in line with a Reuters poll of City economists, which expected a return to modest growth of 0.1% in August based mainly on a recovery in the manufacturing sector.
It keeps the UK on track to meet International Monetary Fund forecasts on Tuesday that it will be the second-fastest growing economy in the G7 group this year.
Inflation is forecast to begin easing before the end of the year and the Bank of England is expected to make further interest rate cuts in 2026, easing the pressure on household incomes.
Fergus Jimenez-England, an associate economist at the National Institute of Economic and Social Research, said recent data had shown there would be only “limited growth” in the third quarter to the end of September “after a difficult summer for businesses”.
He added: “Regaining momentum hinges on restoring business confidence and reducing uncertainty, which the government can support by setting aside a larger fiscal buffer in the upcoming budget.”
after newsletter promotion
The CBI business lobby group said: “Many businesses reported subdued demand and higher operating costs. And firms are choosing to sit tight on hiring and investment until there’s more clarity on the policy outlook.”
The ONS also flagged revisions going back as far as the months before the first Covid-19 pandemic lockdown, which found that the UK had grown at a faster pace than previously estimated. The ONS said growth since February 2020 was 5.5% rather than the 4.4% previously included in the official figures.
Kallum Pickering, the chief economist at the stockbroker Peel Hunt, said the upgrade had “far-reaching positive implications” for the trajectory of growth and productivity estimates by the Office for Budget Responsibility, the Treasury’s independent forecaster.
Separate reports by the Resolution Foundation and the Centre for Cities thinktanks also found that the UK’s productivity – which measures the output per worker in a period of time – had been higher over recent years than previously estimated, giving a boost to growth and tax receipts.
A spokesperson for the Treasury said: “We have seen the fastest growth in the G7 since the start of the year, but for too many people our economy feels stuck. Working day in, day out without getting ahead.
“The chancellor is determined to turn this around by helping businesses in every town and high street grow, investing in infrastructure and cutting red tape to get Britain building.
