UK economy returns to growth
The UK’s economy grew by 0.2% in August, according to official figures.
The slight rise in gross domestic product (GDP) – which is intended as a measurement of a country’s total output – comes after two successive months of stagnation.
The figures, from the Office for National Statistics (ONS), were in line with economists’ forecasts.
Liz McKeown, from the ONS, said: “All main sectors of the economy grew in August, but the broader picture is one of slowing growth in recent months, compared to the first half of the year.”
She added: “In August, accountancy, retail and many manufacturers had strong months, while construction also recovered from July’s contraction. These were partially offset by falls in wholesaling and oil extraction.”
The ONS estimated that the economy also grew by 0.2% in the three months to August.
Good timing for a return to growth
A return to growth of 0.2% in August after two months of flatlining is modest and confirms the anticipated slowdown in the second half of this year, but is welcome nonetheless largely by virtue of its timing.
The chancellor and prime minister are preparing to welcome several hundred international investors to an Investment Summit in London on Monday, an event that will bring together CEOs from private companies, investment houses and sovereign wealth funds for 48 hours of hard-sell on the virtues of the UK, lubricated by receptions and royalty.
The event is seen as vital because, if the new government is going to deliver on its promises to accelerate growth through an overhaul of the national infrastructure, the UK cannot do it alone. Foreign capital investment is crucial, so evidence there is life in the torpid economy is helpful, even if only at the margins.
Rachel Reeves acknowledged as much in her immediate response to the figures, notably welcoming growth without, as previously since entering No 11, stressing the parlous state of the public finances she inherited.
Were gallows humour permitted at the Treasury, she might also argue that three weeks out her first budget is already driving growth, thanks to attempts to avoid its consequences. The Office for National Statistics reports today that professional services, including accountancy, rose 4.3% in August.
Chancellor Rachel Reeves hailed the figures, which come as the government prepares to host an international investment summit next week, as “welcome news”.
She added: “Growing the economy is the number one priority of this government so we can fix the NHS, rebuild Britain, and make working people better off.
“While change will not happen overnight, we are not wasting any time on delivering on the promise of change.”
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The services sector was the main contributor to growth, rising by 0.1% in August after a similar increase in July.
Officials confirmed there were no revisions to its previous estimates of zero growth in both June and July.
Researchers also found that the UK’s total underlying trade deficit widened by £3bn to £10bn in the three months to August 2024, driven by an increase in imports of goods.
Economist Ashley Webb, from research firm Capital Economics, said the GDP figure for August “lends some support to our view that a mild slowdown in growth in the second half of this year is more likely than another recession”.
It comes ahead of the Bank of England’s next decision on interest rates in November. Financial markets have priced in an 80% chance of a cut, according to the latest figures on Friday.
Suren Thiru, economics director at the Institute of Chartered Accountants, said: “While interest rates are still likely to fall in November, these positive figures mean it’s not quite a done deal by giving the more hawkish rate setters enough encouragement over economic conditions to hold off voting to relax policy.”