UK economy unexpectedly grows 0.1% in August

The UK economy reported surprise growth in August on the back of strong factory production, according to official figures, in a boost to the Chancellor ahead of the autumn Budget.

Nevertheless, it represented a slowdown after stronger activity earlier in the summer.

The Office for National Statistics reported that gross domestic product (GDP) increased by 0.1% in August, following 0.4% growth in July.

The statistics body also said the economy grew by 0.4% in June, revising its previous prediction of 0.3% upwards.

The August reading surpassed the expectations of economists, who had pointed to a 0.1% decline for the month.

It suggests resilience in the UK economy despite pressure on consumer spending and wider volatility in the global economy due to the conflict in the Middle East.

Growth in August was significantly driven by the production sector, which grew by 0.8% for the month – the fastest rate for nine months.

The ONS said that this was partly driven by growth in the manufacturing sector, which lifted by 1.2% due to a boost from the pharmaceutical sector.

Meanwhile, the key services sector was flat for August following strong growth in the previous two months.

Experts highlighted strength in the sale of motor vehicles, but reported a 2.7% monthly decline for bars and restaurants.

The construction sector also declined further, with a 0.2% fall for August amid pressure from high mortgage rates.

Data showed that the economy grew by 0.7% over the three months to August.

ONS director of economic statistics Liz McKeown said: “GDP growth showed further strength in the latest three months, led by the services sector, while both production and construction fell.”

Economists have suggested the fresh data shows that the UK economy has had strength in recent months but could come under pressure later this year as inflation accelerates.

Yael Selfin, chief economist at KPMG, said: “The UK economy had shown considerable strength in the first eight months of the year, despite significant external headwinds from the Iran conflict and higher energy prices.

“However, households now face renewed pressure from rising wholesale natural gas prices and higher long-term interest rates, which could weigh on activity over the coming months.

“Against this backdrop, the Chancellor may feel inclined to take a cautious approach at the upcoming Budget, keeping net borrowing on a declining path as a share of GDP whilst avoiding major tax rises.”

Ben Jones, senior lead economist at the CBI, said: “The economy has generally performed well so far this year.

“But amid rising inflation and tightening financial conditions, maintaining that momentum does look difficult, with a more subdued end to 2026 in prospect.”

Published: 15/10/2026 by Radio NewsHub