UK Economy Grows 0.1% in August, Beating Forecasts, Healey Says

The UK economy grew by 0.1% in August, beating analysts' forecasts of a slight contraction, according to the latest official figures from the Office for National Statistics (ONS).

Chancellor John Healey described the result as “a sign of resilience” in the face of global economic shocks. He told the BBC that the government wants to give households and businesses “a bit of breathing space” from cost of living and cost of business pressures.

Healey did not say which measures would be included in the Budget, which he will deliver in two weeks. He said the government would “take action where we can”, but added that any spending must be paid for within the existing Budget and controlled.

Mixed picture across sectors

Growth in August was driven by production, which includes manufacturing, oil and gas extraction and energy supply. The services sector, the largest part of the economy, was flat during the month, and construction contracted.

Over the three months to August, the economy grew by 0.7%. ONS director of economic statistics Liz McKeown said computer programming was the largest contributor to what she called “robust” growth over that period. She also noted that production and construction shrank across the three-month period.

The August figure follows growth of 0.4% in July. The ONS also revised its estimate for June to 0.4%, up from 0.3%.

Economists and political reaction

Paul Dales, chief UK economist at Capital Economics, said the economy was “more robust than we thought”. He warned that an expected rise in inflation could still weigh on growth, but said the economy had shown “remarkable resilience to higher energy prices and borrowing costs”.

PwC senior economist Jake Finney linked the country's relatively strong performance to the development of AI infrastructure. He said the UK still trails the United States in investment and its effect on growth, but is making progress and remains ahead of many European peers.

The figures came as Healey attended the annual meeting of the International Monetary Fund (IMF) in Bangkok. Earlier this week, the IMF raised its UK growth forecast for this year and praised the government's plans to reduce debt. IMF managing director Kristalina Georgieva said the UK was showing “a bit of a better growth prospect” than other G7 nations.

The Conservatives said the figures concealed “worrying trends in key sectors”. Shadow chancellor Andrew Griffith said construction had shrunk for four months in a row, with private housebuilding falling fastest, and called on Healey to cut taxes and reduce red tape.

Liberal Democrat Treasury spokesperson Daisy Cooper said the 0.1% growth was “nothing to celebrate”, adding that the economy was “stuck in first gear” and that many families were still struggling to make ends meet.

Healey said the growth showed Britain's resilience, and pointed to the potential impact of AI on productivity, which he said was only beginning to show. He said the technology carries “huge potential, as well as huge risks”, and that the priority is to develop it safely while seizing its opportunities.