U.K. economy returned to modest growth in August; GDP rose just 0.1%

Published 16/10/2025, 07:14
© Reuters.

Investing.com - The U.K. economy returned to modest growth in August, after flatlining the prior month, in what could be seen as a helpful boost for Chancellor Rachel Reeves as she prepares to deliver the autumn budget. 

Data released earlier Thursday by the Office for National Statistics showed that U.K. gross domestic product grew by 0.1% in August on a monthly basis, following no growth in July. 

On an annual basis, the U.K. economy expanded by 1.3% in August, a small downward adjustment from the 1.5% growth seen the previous month, which has been revised higher from the original 1.4% growth seen.

The ONS also reported that GDP grew by 0.3% in the three months to August 2025 compared with the three months to May 2025, a slight increase following growth of 0.2% in the three months to July 2025.

British finance minister Rachel Reeves is set to announce her latest decisions on taxation next month, and, despite raising taxes by about £40 billion in her first budget last year, faces having to find around £22 billion to meet her rule that day-to-day spending is in balance with tax revenues by the end of the decade, according to estimates by the Institute for Fiscal Studies.

Her options on November 26 are complicated by her promise to voters in the 2024 election that she would not raise the main rates of taxation on them.

Increases in taxation threaten cutting off any meager growth the country has to offer, and could complicate the Bank of England’s monetary policy decisions at its meeting early next month.

This meeting will include a decision on the base rate, with the previous meeting on September 18, resulting in the rate being held at 4.00%. 

“Issues remain in the U.K.. Inflation remains high, as do interest rates, as the Bank of England awaits assurance that inflation is under control before cutting further,” said Michael Field, chief equity strategist at Morningstar.

 

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