The UK economy showed unexpected resilience in August, expanding by 0.1% according to the latest Office for National Statistics figures, delivering a much-needed boost ahead of Chancellor John Healey’s maiden Budget.
Production leads the recovery
The modest growth was driven by an increase in production, which encompasses manufacturing, oil and gas extraction, and energy supply. However, the picture was mixed across key sectors: services, which account for the largest share of Britain’s economic output, remained flat, while construction saw a contraction.
Better than expected
The 0.1% expansion beat analysts’ forecasts of a slight contraction, suggesting underlying momentum in the economy. The growth was accompanied by an upward revision to June’s output, which was raised from 0.3% to 0.4%.
IMF backing
The positive figures come as the International Monetary Fund praised the UK’s fiscal plans during the annual meetings in Bangkok. Managing director Kristalina Georgieva noted that the UK stands out among G7 nations for its growth prospects despite global economic headwinds.
Why it matters
The bounce-back offers Healey some welcome breathing room as he prepares his Budget. However, the chancellor still faces the challenge of delivering fiscal balance without relying on increased borrowing, particularly as inflation pressures persist and global borrowing costs remain elevated.
What happens next
Healey is set to deliver his Budget on 27 October, where he will likely outline tax policies and spending priorities. The August growth figures may provide political capital for more optimistic fiscal projections, though economists caution that sustaining growth through the autumn will require careful navigation of energy costs and consumer confidence.
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