"Markets will have been hoping for signs that the UK can maintain its early-year momentum, but it appears that has now dissipated just as we approach a crunch Budget statement from the Chancellor. Rachel Reeves will need to find a tonic and quickly if she is to extricate the economy from its current malaise"
- Lindsay James - Quilter
The Office for National Statistics has reported that UK gross domestic product (GDP) rose by 0.1% in August, overturning a revised 0.1% decline in July. Over the three months to August, GDP expanded 0.3%, up from 0.2% in the prior three-month period.
The increase was driven by a 0.4% rise in production output. Construction declined by about 0.3%, and services showed little change overall.
“Growth for 2024 as a whole is unrevised, though these new figures show the economy grew a little less strongly at the start of last year than our initial estimates suggested but performed better in later quarters,” said Liz McKeown, director of economic statistics, ONS, continuing, “Quarterly growth rates for 2025 are unrevised.”
Economists welcomed the modest rebound but cautioned about risks ahead. Thomas Pugh, chief economist at RSM UK, noted that the increase in the saving ratio suggests consumers are becoming more cautious.
Stuart Morrison, Research Manager at the British Chambers of Commerce said: “Today’s data shows the economy picking up slightly, driven by services and construction. That will be welcomed by business, ahead of what is expected to be a challenging Budget next month.
“However, growth of 0.3% in the three months to August, and 0.1% in the month itself, won’t settle the long-standing concerns of the firms we represent.
“Our latest survey shows business confidence and investment levels continue to suffer. A fifth of firms are expecting lower turnover over the next year, and a quarter have scaled back investment plans.
“For the last twelve months, SMEs have told us the same story: rising costs, weak investment, and little sense of relief on the horizon.
“All eyes will be on the Chancellor’s make-or-break Budget next month. Our message is simple – no more taxes on business. Growth will only improve if business confidence improves, and that won’t happen if more cost pressures are piled on firms. The Chancellor must also use her statement to tackle the skills crisis, support exports, and turbocharge infrastructure projects.”
Lindsay James, investment strategist at Quilter, said: “In the week that the International Monetary Fund gave the UK’s economic growth forecasts a small bump up, today’s GDP figures paint a picture of an economy stumbling to the end of the year after a strong start. Monthly GDP grew just 0.1%, giving a three-month rate of 0.3% - not exactly exciting figures."
"Markets will have been hoping for signs that the UK can maintain its early-year momentum, but it appears that has now dissipated just as we approach a crunch Budget statement from the Chancellor. Rachel Reeves will need to find a tonic and quickly if she is to extricate the economy from its current malaise."
“There are a number of obstacles coming down the track for the economy, too. The IMF confirmed the UK has an inflation problem and is struggling to get out of it. That will continue to put pressure on the consumer. Meanwhile, both businesses and individuals are fearful of what is coming in November’s budget after Rachel Reeves confirmed tax rises are being looked at. Last year showed just how much impact that uncertainty can have on economic growth, and now this year appears as if it will be no different."
“Recent corporate surveys have also pointed to a contraction in the manufacturing sector, with factors cited including US tariff uncertainty, weak client confidence, the higher cost backdrop and even the supply chain effects of the Jaguar Land Rover production shutdown. More worryingly, the service economy, which has been the strong part of the UK economy for some time, has also shown signs of slowing with the political and economic uncertainty cited as a headwind for activity in the sector – for the second consecutive month, services output is estimated to have shown no growth."
“If this government is about stimulating growth, then this Budget needs to restore some much-needed confidence in the outlook. Tax rises will continue to act as a heavy anchor on the economy, and anything that adds yet more inflationary pressure should be shelved for another day.”
Derrick Dunne, CEO of YOU Asset Management, commented: “While it is encouraging to see some GDP growth over the summer, what remains clear is that significant challenges lie ahead for the UK economy."
“Any growth is going to be helpful to Rachel Reeves ahead of the Budget, but the truth is the growth we have now is not enough to stay ahead of our obligations. This will likely be confirmed by the OBR’s report when it is published alongside the Government’s tax and spend announcements, which look set to blame the shortfall on poor productivity.
“There is still a rising likelihood now that the public will have to bear the brunt of tax increases in order to shore up the public finances. Where those tax increases come remains to be seen. But until growth and productivity are improved, we will continue to face new tax measures that will fundamentally not help the economy get out of its funk.
“For households concerned about what the Budget may contain, it is critical not to make rash financial decisions without seeking professional guidance. Anyone who is unsure about the current outlook and their personal finances should speak to a financial planner.”
Richard Pike, chief sales and marketing officer at Phoebus Software, said: “Growth in GDP is encouraging and in line with the IMF’s prediction this week that the UK will have the second-fastest growing economy in the G7 this year. But it doesn’t change the fact that the economy remains finely balanced. Inflation is still high and predicted to remain there, and unemployment is rising. That combination makes it harder for the Bank of England to justify cutting rates in November."
“For now, stability is likely to be the Bank’s priority. A premature rate cut could risk reigniting price pressures just as they’re starting to ease."
“Attention will now turn to the Autumn Budget. The Chancellor faces the difficult task of supporting growth without fuelling inflation. Targeted investment in productivity and innovation would be far more effective than broad tax giveaways."
“Today’s figures are a positive signal, but not enough to declare victory. The recovery is still fragile and will need careful management from both the Bank and the Treasury in the months ahead.”
