The Last Growth Figures Before the Budget
The Office for National Statistics — Britain’s official statistics agency — reported that the UK economy grew by 0.1% in August. [1] It was also the last set of official growth figures before John Healey, the chancellor, sets out his tax and spending plans.
The month before, July, had produced growth of 0.4%. Alongside August’s figure came positive upgrades to the outlook for Britain’s economy from the International Monetary Fund, the global watchdog that monitors national finances.
Over the three months to August, the economy grew by 0.7% overall.
What built August’s 0.1% was production. The ONS’s grouping of production industries takes in manufacturing. It also includes oil and gas extraction. And it includes energy supply. Services, by contrast, was flat across the month, which means no measurable change from the month before. Services is the largest single chunk of the UK economy. Construction, which does put up physical structures, contracted.
ONS director of economic statistics Liz McKeown said computer programming had been the biggest contributor to what she described as “robust” growth over the three months to August. But she said the production and construction sectors shrank over the three-month period.
As well as August’s growth figure being stronger than expected, an earlier estimate for June’s monthly growth was revised up from 0.3% to 0.4%.
“More Robust Than We Thought
Paul Dales, chief UK economist at Capital Economics, said Britain’s economy was “more robust than we thought”. He warned that an expected increase in inflation would still “dampen growth”, but added that the economy was showing “remarkable resilience to higher energy prices and borrowing costs.
PwC senior economist Jake Finney said the development of AI infrastructure was underpinning Britain’s relatively strong performance. “The UK still lags the US in both the scale of that investment and the boost it provides to growth, but it is making progress and remains ahead of many of its European peers,” he added.”
A Balanced Budget Without More Borrowing
Every one of these numbers arrives inside a constraint. Healey must deliver a tax and spending plan in which spending and income are equal without turning to more borrowing.
The latest growth figures were released after Healey landed in Bangkok for the annual meeting of the International Monetary Fund (IMF). Earlier this week, the global financial watchdog praised the UK’s plans to cut debt levels, with global borrowing costs on the rise, with managing director Kristalina Georgieva adding that the country was seeing “a bit of a better growth prospect” than other G7 nations.
Arriving in Bangkok on Thursday, Healey said: “I’m pleased the IMF here in Bangkok backed our economic plans in London. They say the UK stands out on growth despite the deep economic shocks that are affecting worldwide at present.” He promised to “stay the path” as he prepares to deliver the Budget in two weeks’ time.”
