UK economy returns to growth in August in boost to Labour – business live

UK GDP report for August released

Newsflash: The UK economy has returned to growth.

UK GDP rose by 0.2% in August, new data released by the Office for National Statistics shows, after no growth in June and July.

That’s in line with City forecasts.

It’s a welcome boost for the government, after growth flatlined earlier in the summer amid wet weather and the cost of living squeeze.

Details to follow….

Key events

Today’s return to growth, in addition to the relatively strong first half of the year, could lead the Office for Budget Responsibility to upgrade its forecasts, suggests Yael Selfin, chief economist at KPMG UK.

If so, that would give Rachel Reeves a little more firepower in the budget – as higher growth = stronger tax receipts.

Selfin says:

This will provide a timely boost for the Chancellor amidst a backdrop of growing spending pressures.

“Growth in the consumer facing sectors coincides with recently revised consumer spending and savings data, which suggests that households have been less cautious than previously thought. We expect consumer spending to be underpinned by further interest rate cuts and a potential pick-up in consumer sentiment.

Neil Birrell, chief investment officer at Premier Miton Investors, fears that the economy has weakened since August

He cites the drop in consumer and business confidence, following warnings of a tough budget this month, saying:

“The UK economy grew modestly in August in line with expectations. But that feels like a long time ago now. Since then, concerns over government fiscal policy have dented consumer and business confidence and it’s hard to believe that won’t have a real world impact.

When the Bank of England meets in November, they’ll have more data and the Budget details to review, but the economy could benefit from them providing some stimulus.”

Quilter: Relief for Labour as UK economy sees growth

The Labour government needs to build on the growth reported in August, says Lindsay James, investment strategist at Quilter Investors:

“After two months of stagnant growth, and downward revisions for previous quarters, UK GDP has finally shown some growth, despite the lack of summer sunshine. GDP increased by 0.2% on the month, helping the economy bounce back after a difficult period. While growth remains sluggish and momentum appears to be stalling, this figure will provide a sigh of relief for the new Labour administration after a difficult start to life in government. However, given the mandate it has to deliver economic growth and wealth creation, it will need to build on this progress.

“Despite the UK experiencing better-than-expected growth this year and upward revisions in economic forecasts, the gloom surrounding the economy has been hard to shake. Much of this is due to Labour’s rhetoric as they attribute difficult tax and spending decisions to their predecessors. Additionally, bond yields have risen recently as debt continues to grow and inflationary threats persist. Until there is clarity from this month’s Budget, consumer and business confidence will likely remain muted, delaying any economic boost from these better GDP numbers.

UK GDP: the key charts

Illustration: Office for National Statistics

ONS: broader picture is of slowing growth

UK retailers and manufacturers had a good August, the Office for National Statistics reports.

ONS director of economic statistics Liz McKeown says:

“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.

“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.”

Over the last quarter, the economy grew by 0.2%, compared with the three months to May 2024.

That’s a slow rate of growth, due to the stagnation suffered in June and July.

Services, production and construction all grew in August

The services, production and construction sectors all expanded in August, today’s GDP report shows.

The ONS reports:

Services output grew by 0.1% in August 2024, following an unrevised increase of 0.1% in July 2024, and grew by 0.1% in the three months to August 2024.
Production output grew by 0.5% in August 2024, following a revised fall of 0.7% in July 2024 (this was a 0.8% fall in our last publication), but showed no growth in the three months to August 2024.
Construction output grew by 0.4% in August 2024, following an unrevised fall of 0.4% in July 2024, and grew by 1.0% in the three months to August 2024

UK GDP report for August released

Newsflash: The UK economy has returned to growth.

UK GDP rose by 0.2% in August, new data released by the Office for National Statistics shows, after no growth in June and July.

That’s in line with City forecasts.

It’s a welcome boost for the government, after growth flatlined earlier in the summer amid wet weather and the cost of living squeeze.

Details to follow….

Former Darktrace CEO Poppy Gustafsson named as UK investment minister

Poppy Gustafsson, the former CEO of cybersecurity firm Darktrace, has been given a role to boost UK growth in the months ahead.

She was appointed as the UK’s new investment minister last night, just days ahead of the government’s business summit in London.

Gustafsson, who will be made a peer in the House of Lords, is an “accomplished entrepreneur who brings invaluable experience to the role,” Prime Minister Keir Starmer explained.

Gustafsson, 42, was available after stepping down from Darktrace last month following its takeover by private equity firm Thoma Bravo.

Green energy firms promise more than £24bn of new investment in Britain

The UK economy has already received a growth boost this morning – the leaders of the world’s biggest green energy companies have promised more than £24bn of new private investment across Great Britain.

The single largest investment set out ahead of next Monday’s investment meeting was by the owner of Scottish Power, Spain’s Iberdrola, which has promised to double its planned investments in the UK’s clean energy ambitions to reach £24bn over the next four years.

More here:

Deutsche Bank expect UK GDP to pick back up in August after two disappointing reads in June and July (when output flatlined).

Their chief economist, Sanjay Raja, told clients:

Our models point to a 0.2% m-o-m expansion to end the summer, driven by broad-based growth across the services, production and construction sectors. Risks are skewed to the upside, we think. We also think there’s a strong chance that the ONS revises up its initial GDP estimate for July from 0% to 0.1% m-o-m.

All up, downside risks to our growth projections are building – particularly following the weaker-than-expected July GDP print. Should the ONS stick to its initial GDP estimate for July, and August GDP prints in line with expectations, a downward revision to both Q3-24 GDP growth and 2024 GDP will likely be needed. We plan to revisit our projections following the GDP print. The good news is that underlying GDP remains healthy, and we continue to expect GDP growth to converge to trend next year.

Introduction: UK GDP report for August today

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

August was a volatile month in the UK. It began with riots sweeping England, and interest rates being cut for the first time in over four years, and ended with the new Labour government warning that tough decisions would be needed to fix the nation’s finances.

And this morning, we’ll learn how the econony fared during August, in the final GDP report before the budget later this month.

UK GDP has flatlined in June and July, so Chancellor Rachel Reeves will be desperately hoping that we get a number with a plus sign at the front at 7am.

Encouragingly, economics are expecting a return to growth. The City of London is expecting that GDP rose by 0.2% in August.

A weak report could spur the Bank of England towards cutting interest rates, explains Tony Sycamore, market analyst at IG:

The market is looking for GDP to rise by 0.2% in August after flat readings in June and July. A softer-than-expected GDP reading would fuel expectations of a BoE 25bp rate cut at its next meeting on November 7th.