UK Economy Rebounds in August After July Dip

Britain’s economy returned to growth in August, expanding 0.1% from the previous month after a slight decline in July, according to official data released on Thursday. The uptick offers some relief to Finance Minister Rachel Reeves as she prepares for her budget speech next month.

The Office for National Statistics (ONS) revised July’s data to show a 0.1% contraction from June, compared with an earlier estimate of flat growth.

Earlier this week, the International Monetary Fund (IMF) said the UK was on track to record the second-fastest growth among the G7 nations, after the United States.

However, the 1.3% annual growth rate remains insufficient to spare Reeves from the potential need for tax increases in her upcoming budget.

Economists polled by Reuters had forecast a 0.1% monthly rise in GDP for August. The ONS also reported that growth in the three months to August rose slightly to 0.3%, up from 0.2% in the three months to July.

The Bank of England (BoE) last month raised its forecast for third-quarter growth from 0.3% to 0.4%. BoE policymakers, who kept interest rates steady at 4% in September, continue to navigate a difficult balance between stubborn inflation and weak economic momentum.

Governor Andrew Bailey said on Tuesday that the UK’s labour market was showing signs of cooling and inflationary pressures were easing, after data revealed unemployment at its highest level since 2021 and slower private-sector wage growth.

Monetary Policy Committee member Alan Taylor also warned this week that the British economy faced “downside risks,” partly due to the impact of U.S. President Donald Trump’s new trade tariffs.

Data published earlier this week showed muted retail sales growth, reflecting consumer caution ahead of Reeves’s 26 November budget, where potential tax hikes are expected to be a key concern.