Prime Minister Sir Keir Starmer has warned the Budget will be “painful”, with the government admitting some taxes will rise.
Liz McKeown, director of economic statistics at the ONS, said accounting, bookkeeping and auditing businesses had helped to boost the economy alongside retail and manufacturers in August.
She added construction also bounced back from July’s downturn, with new infrastructure projects starting up, but added: “The broader picture is one of slowing growth in recent months, compared to the first half of the year.”
Ben Jones, lead economist at the CBI business group, said it was clear some firms had “paused hiring and investment decisions” before getting “more clarity over the direction of the new government’s economic policies” in the Budget.
“The big question mark is the government’s vision for the economy,” said Barret Kupelian, chief economist at PwC, adding that for economic growth to be sustained, “businesses, households and foreign investors require certainty to make choices”.
There is growing speculation over what tax rises the Chancellor, Rachel Reeves, will announce, given the government has promised not to increase the burden on “working people” and ruled out increasing VAT, national insurance or income tax.
The Budget will be the government’s first big opportunity to set out its spending and taxation priorities, but it comes against a backdrop of higher debt following the pandemic, higher interest rates and inflation that has only recently returned to normal levels.
Reeves is planning to change borrowing rules to free up billions of pounds more in spending for big projects in a bid to boost the economy, but the move will not prevent her introducing further tax rises.
The chancellor said on Friday that growing the UK economy was the government’s top priority, “so we can fix the NHS, rebuild Britain, and make working people better off”.
The ONS monitors GDP – or gross domestic product – on a monthly basis, but more attention is paid to the trend over three months. Weaker performance earlier in the summer meant growth of just 0.2% between June and August compared with the previous three months.
At the end of last year the UK fell into a shallow recession, with the economy contracting for two three-month periods in a row. Growth rebounded in the first half of 2024.
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