UK economy edges up by 0.1% in August

The UK economy returned to modest growth in August, buoyed by a rebound in manufacturing output, according to the latest figures from the Office for National Statistics (ONS).

Gross domestic product (GDP) grew by 0.1% in August, following a 0.1% contraction in July – a downgrade from the ONS’s earlier estimate of flat growth – and a 0.4% expansion in June.

The slight uptick in August offers a glimmer of relief for the Treasury ahead of next month’s Autumn Budget, but economists warned that underlying growth remains subdued and uneven across sectors.

The main driver of growth was the production sector, which rose 0.4% in August, led by a 0.7% increase in manufacturing. Construction output, by contrast, fell by 0.3%, while the dominant services sector recorded no growth for the second consecutive month.

The ONS said that in the three months to August 2025, the economy grew 0.3%, up slightly from 0.2% in the three months to July. Services output increased by 0.4% over the same period, while production fell 0.3% and construction edged up 0.3%.

“Economic growth increased slightly in the latest three months. Services growth held steady, while there was a smaller drag from production than previously,” said Liz McKeown, Director of Economic Statistics at the ONS.

The figures come at a critical time for Chancellor Rachel Reeves, who faces growing pressure to stimulate growth while keeping borrowing under control. The Institute for Fiscal Studies (IFS) has warned that Reeves may need to find £22 billion to plug a fiscal shortfall, likely requiring tax rises or spending cuts to meet her own borrowing rules.

On Wednesday, Reeves acknowledged she was “looking at further measures on tax and spending, to make sure that the public finances always add up.”

The Treasury struck an optimistic tone, highlighting that Britain remains one of the stronger-performing major economies so far this year.

“We have seen the fastest growth in the G7 since the start of the year, but for too many people our economy feels stuck,” a Treasury spokesperson said. “The Chancellor is determined to turn this around by helping businesses in every town and high street grow, investing in infrastructure and cutting red tape to get Britain building.”

Despite the modest gains, many economists believe the outlook remains fragile. Growth has slowed since spring, when GDP advanced 0.7% in the first quarter, and business confidence has been dented by higher employer National Insurance contributions and sluggish consumer demand.

The International Monetary Fund (IMF) this week predicted that the UK would be the second-fastest-growing advanced economy in 2025 but also warned it will face the highest inflation rate among G7 countries over the next two years, driven by rising energy and utility bills.

Mike Randall, Chief Executive of Simply Asset Finance, said the figures were a “welcome sight” for the Chancellor but cautioned that resilience alone would not sustain recovery.

“Some business-positive policy in the Budget would give the economy a welcome shot in the arm,” he said. “Some business-positive policy in the Budget would be a certain way to give the economy a welcome ‘shot in the arm’, but it is certainty and stability that enables businesses to make investing decisions and set a clear plan for growth. Aligned policy direction, not incremental changes or loose promises, should now be the overwhelming priority for those in Number 11 to keep us on the road to growth.”