August Sees Growth in Economy, According to Figures
The Office for National Statistics reported a slight uptick in GDP for August, as the chancellor readies for the upcoming Budget amidst warnings of potentially unpopular decisions.
The UK economy saw growth in August following two stagnant months, offering a slight boost for Chancellor Rachel Reeves ahead of her first Budget at the end of the month.
According to the Office for National Statistics (ONS), GDP showed a 0.2 percent increase in August, compared to no growth in June and July, which coincided with the general election won by Labour.
Despite this growth being in line with expectations, Reeves’s Budget is anticipated to involve cuts in public spending and some tax increases, especially for higher rate tax payers, although not in general taxation.
Prime Minister Sir Keir Starmer has signaled a willingness to make more “unpopular decisions” following the unexpected decision to scrap the winter fuel allowance for most pensioners in July.
Reeves welcomed the latest figures, emphasizing that economic growth remains the top priority for the government to address issues like fixing the NHS, rebuilding Britain, and improving the lives of working people.
‘Tough Decisions’ Ahead
Reeves, echoing Starmer, cautioned that the upcoming Budget will include challenging decisions from the government.
The economy still appears relatively weak compared to the first half of 2024, after rebounding from a recession in late 2023 due to lockdowns and other restrictions over a two-year period.
Liz McKeown, ONS Director of Economic Statistics, noted that while all main sectors of the economy experienced growth in August, the overall trend suggests a slowdown compared to the first half of the year.
Services Sector Growth
The services sector contributed the most to growth, increasing by 0.1 percent in August after a similar rise in July.
The productive sector also saw growth of 0.5 percent in August, following a contraction in July, while construction output grew by 0.4 percent in August and by 1 percent in the three months leading up to August.
Economists anticipate another quarter-point cut to the base interest rate during the Bank of England’s November meeting, but positive GDP figures could lead to some rate setters hesitating.
Looking ahead, economists are concerned about the potential impact of the upcoming Budget on economic activity, as speculation around it may cause a further slowdown.
The government is organizing a business summit in London next week to attract more foreign direct investment into the UK.
PA Media contributed to this report.
