UK GDP rose by 0.1 per cent in August, easing recession fears. The Office for National Statistics (ONS) said modest gains in services and manufacturing offset July’s contraction, suggesting the economy is stabilising ahead of next month’s Budget.
The ONS confirmed that the UK economy expanded by 0.1 per cent in August, following a downwardly revised 0.1 per cent fall in July. Growth over the three months to August stood at 0.3 per cent, supported by business services and construction activity.
The small uptick keeps the UK on track for a mild expansion in the third quarter, according to the Bank of England’s latest forecast of 0.4 per cent growth. However, output remains subdued as high borrowing costs and weak consumer confidence weigh on demand.
The services sector — which represents about four-fifths of the economy — grew 0.1 per cent in August, led by professional and scientific services. Manufacturing output rose 0.2 per cent, helped by automotive production, while construction grew 0.3 per cent. Retail trade and hospitality were flat, reflecting continued pressure on household budgets.
“While these figures suggest the economy is edging forward, growth remains fragile,” said Alex Kerr, senior economist at the British Chambers of Commerce. “Businesses are still dealing with tight credit conditions and a cooling labour market.”
Unemployment rose to 4.6 per cent in the three months to August — its highest since 2021 — as vacancies declined and wage growth slowed. Private sector pay increased 5.2 per cent year-on-year, down from 5.6 per cent the previous month, according to ONS data.
Inflation remains a constraint on spending, with consumer prices rising 2.8 per cent in the year to September. Real wage growth has eased as energy and food costs stabilised, but the Bank of England has signalled caution, keeping interest rates at 4 per cent for a third consecutive meeting.
The latest figures will shape Chancellor Rachel Reeves’s fiscal plans ahead of the 26 November Budget. Treasury officials said the government would “continue to prioritise stability and sustainable growth,” while analysts warned that sluggish output could limit room for tax cuts.
Business surveys point to mixed momentum entering the autumn. The UK’s composite Purchasing Managers’ Index rose to 50.2 in September, indicating marginal expansion. Export orders remain weak, though manufacturers reported easing supply costs.
Economists expect quarterly growth to settle between 0.3 and 0.4 per cent through the end of the year. “The economy is showing resilience, but it’s more of a shuffle than a stride,” said Ruth Gregory, deputy chief UK economist at Capital Economics.
The next GDP release, due in November, will confirm whether the UK avoided contraction over the summer months — a key test for the government as it seeks to reassure investors and voters that recovery remains on track.
