The economy bounced back in August following two months of stagnation, according to official data, providing a lift for Chancellor Rachel Reeves ahead of the Autumn Budget.
The Office of National Statistics (ONS) released figures this morning indicating that GDP increased by 0.2 per cent in August, aligning with economists' predictions.
All primary sectors of the º£½ÇÊÓƵ economy experienced growth last month. The services sector saw a rise of 0.1 per cent, while production and construction expanded by 0.5 and 0.4 per cent, respectively.
Despite these figures confirming the resumption of economic expansion, the º£½ÇÊÓƵ is not anticipated to revert to the strong growth rates witnessed earlier in the year. Due to the slowdown in June and July, growth over the past quarter totalled 0.2 per cent.
Liz McKeown, director of economic statistics at the ONS, commented: "The broader picture is one of slowing growth in recent months, compared to the first half of the year,", as reported by .
"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."
Chancellor of the Exchequer, Rachel Reeves, responded: "It's welcome news that growth has returned to the economy. 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. Next week hundreds of the world's biggest businesses will come to Britain as we deliver on our promise to bring investment, growth, and jobs back to every part of the country."
Despite recent downward revisions, the º£½ÇÊÓƵ was among the fastest growing economies in the G7 in the first half of 2024. The º£½ÇÊÓƵ's surprising economic strength came thanks to an improving picture on the supply side as well as a recovery in consumer spending power.
However, some business leaders were less than impressed, with one London group branding growth "anaemic".
While economic activity has slowed, many of the positive trends remain intact which should help ensure that the economy continues to expand modestly over the remainder of this year.
Most economists believe the º£½ÇÊÓƵ is still on track to grow around 1.0 per cent in 2024, well ahead of the 0.3 per cent forecasted by analysts last December.
Nevertheless, the º£½ÇÊÓƵ's longer term growth performance has been disappointing and the new Labour government has pledged that wealth creation will be its "number one priority".
Since entering office the government has announced a major overhaul of the planning system and Chancellor Rachel Reeves is expected to ramp up public investment in the upcoming Budget.
However, businesses are apprehensive that the government's attempts to put the public finances on firmer ground will interfere with its growth mission.
Recent business surveys have indicated a dip in business confidence amid speculation about potential tax increases, with particular concern over capital gains and employers' national insurance contributions.
Muniya Barua, Deputy Chief Executive at BusinessLDN, commented: "All eyes will be on the Chancellor to see how she intends to kickstart the economy after this latest data shows growth is still anaemic."
Companies are seeking more definitive guidance from the Government regarding their fiscal and expenditure strategies in the upcoming Budget, aiming to plan ahead with greater assurance.
"The Chancellor should prioritise measures that can unlock significant sums of private investment such as confirming HS2 will reach Euston, which could contribute £41bn to the economy over the next three decades. There are also several no or low cost steps that can boost the economy such as giving local leaders the tools they need to drive growth, establishing clear infrastructure funding models to crowd in private cash and ensuring the new Growth & Skills Levy is designed in a way that encourages investment in training."
Anna Leach, chief economist at the Institute of Directors, remarked: "It's good to see the economy return to growth in August, after two months of stagnation."
She anticipates that growth for the latter half of the year may slow down as the headline activity adjusts to align with the underlying momentum.
"Ahead of the Budget, there's an understandable focus on addressing this year's fiscal deficit. But we need to shift the narrative from filling today's deficit to building tomorrow's economy that's the key to sustainable public finances and higher living standards."
