The UK economy grew by 0.2% in August; however, concerns remain as the budget approaches on October 30.
UK Economy Rebounds, Offering Boost to Rachel Reeves Ahead of Budget
By Lydia Amazouz
Published on 12 October 2024 10:15
The UK economy grew by 0.2% in August after staying the same for two months, giving a boost to Chancellor Rachel Reeves before the autumn budget. The Office for National Statistics (ONS) said this increase matched what economists had expected.
UK Economy Grows Slowly Despite Challenges and Calls on Investment
The UK economy grew by 0.2% in the three months up to August, although this is slower than the earlier growth in 2024 when it increased by 0.7% in the first quarter and 0.5% in the second, after coming out of a mild recession at the end of 2023, The Guardian reports.
Rachel Reeves has said that Labour’s first budget in over 10 years will focus on growing the economy. Her plan includes more investment, helping people earn more, and fixing public services. She has also warned that tough decisions will be needed to keep the budget balanced.
Reeves added that the government will host a global investment summit next week to attract large companies from around the world to invest in the UK, creating jobs and boosting the economy.
She said:“It’s welcome news that growth has returned to the economy,” adding: “While change will not happen overnight, we are not wasting any time on delivering on the promise of change.”
Earlier in the summer, economic growth stayed flat as rainy weather discouraged people from spending, while households continued to face high prices and increased borrowing costs.
Bank of England Lowers Rates as UK Economy Shows Signs of Recovery Amid Budget Concerns
After inflation returned to more normal levels, the Bank of England began lowering interest rates in August, dropping them from 5.25% to 5%. In September, it kept rates the same, but financial markets expect another cut at its next meeting in November.
The latest figures from the ONS showed that the UK's main service sector grew by 0.1% in August, driven by work in professional, scientific, and technical fields. The production sector, which includes manufacturing, also grew, with output rising by 0.5% after falling by 0.7% in July. Construction activity bounced back as well, growing by 0.4% in August after a similar decline the previous month.
However, business and consumer confidence has dropped in recent months due to concerns about a tough budget on 30 October.
David Bharier, head of research at the British Chambers of Commerce, said the upcoming budget is very important. He noted that businesses understand the financial challenges the government is dealing with and the need to manage public money. However, he stressed that this shouldn’t come at the expense of investment and growth.