The UK economy recorded modest growth in August, according to the latest figures from the Office for National Statistics (ONS), as attention turns to Chancellor Rachel Reeves’s upcoming Budget next month.

Economic output rose by 0.1%, supported primarily by a 0.7% increase in manufacturing activity. However, July’s performance was revised down from flat growth to a 0.1% contraction, highlighting the fragile nature of the recovery.

Over the three months to August, the economy expanded by 0.3%, up slightly from 0.2% in the previous period. The services sector  which makes up the majority of UK output  showed no growth, underlining continued weakness in consumer-facing industries.

With the government prioritising growth while maintaining fiscal discipline, economists are anticipating difficult choices in the Budget. The Institute for Fiscal Studies (IFS) estimates that the Chancellor must find £22 billion to meet her borrowing rules, suggesting that tax rises or spending restraint are likely.

Reeves has hinted that new tax and spending measures are under consideration to ensure the public finances “add up.” Analysts view this as the clearest indication yet that targeted tax increases could feature in the Budget.

Economists warn that the UK’s growth prospects remain subdued. Yael Selfin, Chief Economist at KPMG UK, noted that while the economy has returned to growth, higher household costs and uncertainty around potential tax changes are weighing on spending and investment.

Ruth Gregory of Capital Economics described August’s growth as meagre, pointing to earlier business tax increases and supply disruptions  including the Jaguar Land Rover cyberattack  as additional drags on performance.

The November Budget is expected to be a defining moment for the new Chancellor. Reeves faces the challenge of stimulating growth while maintaining fiscal credibility  a balancing act that will shape the UK’s economic trajectory into 2025 and beyond.

Source: Bbc