UK economy grows more than expected ahead of Healey’s first Budget

The UK economy grew by 0.1% in August, official figures showed, beating analysts’ expectations of a slight contraction and giving Chancellor John Healey a brighter backdrop ahead of his first Budget in two weeks.

Healey called the result a “sign of resilience” amid global economic shocks. He said he wanted to ease pressure on household and business costs, but gave no details of measures he might announce, stressing that any spending plans must fit within the Budget and maintain fiscal discipline. [1]

The Office for National Statistics (ONS) said the economy expanded by 0.7% in the three months to August. August’s growth followed a 0.4% rise in July; the ONS also revised its estimate for June’s monthly growth up from 0.3% to 0.4%.

The monthly figures were uneven across sectors. Production, including manufacturing, oil and gas extraction and energy supply, increased, while services, the largest part of the economy, were flat and construction contracted. The ONS said computer programming was the biggest contributor to growth over the three-month period, although production and construction shrank across that span. [1]

Economists offered different explanations and cautions. Paul Dales of Capital Economics said the economy was more robust than expected, but warned that rising inflation could dampen growth. PwC economist Jake Finney said investment in artificial-intelligence infrastructure was supporting performance, while noting that the UK remained behind the US in the scale of investment and its contribution to growth. [1]

The political response was more sceptical. The Conservatives said the headline figures concealed weakness in key sectors; shadow chancellor Andrew Griffith pointed to four consecutive months of contraction in construction and called for tax cuts and less red tape. Liberal Democrat Treasury spokesperson Daisy Cooper said August’s growth was “nothing to celebrate”, arguing that families were still struggling with living costs. [1]

Healey also said the Budget would be difficult and would not include inflation-related pay top-ups for public-sector workers. Asked about extra funding for nurses and doctors, he said the government had to deliver public services within existing budgets and control spending. [1]