UK economy sees 0.2% growth in August

The UK economy grew by 0.2% in August 2024, marking a recovery after two flat months in June and July, according to the latest data from the Office for National Statistics (ONS). This modest increase in gross domestic product (GDP) was driven by growth across all main sectors of the economy, particularly in services and construction.

In the three months leading up to August, real GDP also grew by 0.2% compared to the preceding three-month period (May–August 2024). Services output, which represents the largest portion of the UK economy, rose by 0.1%, contributing significantly to the overall economic performance.

The construction sector saw a robust increase of 1.0% in the three months to August, bouncing back after weather disruptions earlier in the summer, while production output remained flat over the same period.

In August alone, all major sectors experienced growth. Services output increased by 0.1%, production output rebounded with a 0.5% rise following a contraction in July, and construction output grew by 0.4%. Construction activity was boosted by a 1.6% rise in new projects, despite a 1.0% decline in repair and maintenance work.

Liz McKeown, director of economic statistics at the ONS, highlighted the broader trend of slowing growth: “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.”

Accountancy, retail, and manufacturing sectors all performed well in August. Builders, in particular, saw a resurgence as they returned to work after delays caused by bad weather in the early summer.

Chris Smith, head of specialist equipment at Aldermore Bank, noted that recent interest rate cuts and political stability following the election have improved the outlook for the construction sector.

He pointed to strong growth in private housing and commercial projects, signalling renewed confidence in the industry.

““It’s encouraging to see output bounce back after a sluggish July. Recent rate cuts and the election has brought much needed stability, and we can see this in the growth in new work in private housing and private commercial, which saw the highest increases. There is cause for optimism within the sector, especially with the Government’s recent plans to increase housebuilding targets, so as we approach the Autumn Budget the sector will be keeping a close eye for any new developments,” he commented.

However, challenges remain for construction businesses. Smith emphasized ongoing issues such as inflationary pressures and supply chain delays, which continue to affect nearly 68% of small and medium-sized enterprises (SMEs) in the sector.

As the UK approaches the Autumn Budget, attention will be focused on whether the government introduces new measures to support continued growth, particularly in sectors like construction that are key drivers of economic activity.

Mike Randall, CEO at Simply Asset Finance, commented on August’s GDP figures: “A marginal rise in GDP offers some hope for the economy, and could suggest businesses are remaining optimistic.

“However, many businesses are still tentatively waiting for transparency before making any bold moves. This is understandable ahead of a budget, but it’s vital the Government provides clarity and reassurance to the UK’s 5.5million SMEs on October 30th, if it is to successfully achieve growth.

“And there’s clear potential for growth. Just last month the OECD updated its growth forecasts for 2024 from 0.4% in May, to 1.1%. But reaching this goal will be impossible without ensuring the success of small and medium sized businesses. While there are important fiscal challenges to solve in Labour’s first budget, we urge the Government to prioritise pro-business policy to ensure that SME growth ambitions, and economic recovery are not overlooked.”