UK economy returns to growth in August after two months of stagnation

The latest figures come as the government prepares for the Budget at the end of October. Prime Minister Keir Starmer, has already warned that some decisions will be “painful”, with the government admitting some taxes will rise.

A bounce back in construction and strong month for accountancy, manufacturers and retail businesses helped boost the economy by 0.2%, after it failed to grow in the previous two months.

ONS director of economic statistics Liz McKeown 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.”

Growth in UK economy remains weaker than expected

In a statement, Ben Jones, lead economist at the CBI business group said: “There are some encouraging signs in the latest GDP data, particularly the ongoing recovery in retail, but growth remains uneven across sectors and momentum in the economy is a little weaker than was expected a few months ago.”

He added: “It’s clear that some firms have paused hiring and investment decisions pending more clarity over the direction of the new government’s economic policies.”

The latest figures from the ONS come at the government prepares for the Budget at the end of October, its first big opportunity to set out its spending and taxation priorities.

Mr Jones added: “With the Chancellor’s first Budget only weeks away, the government has an opportunity to build momentum behind the economic recovery by demonstrating it has a credible plan for boosting the country’s growth trajectory.”

Chancellor says new figures are a positive sign

In a statement, Chancellor of the Exchequer Rachel Reeves said: “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.”