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The latest official figures show a slight growth in the UK economy in August, primarily boosted by an increase in manufacturing output. According to the Office for National Statistics, the economy expanded by 0.1%, rebounding from a 0.1% contraction in July. Despite the government’s efforts to prioritize economic growth, economists anticipate sluggish growth in the coming months, with pressure mounting ahead of the upcoming Budget.
With the Institute for Fiscal Studies projecting a £22 billion shortfall in government finances, there are expectations of tax hikes or spending cuts to meet the chancellor’s borrowing rules. According to forecasts, Chancellor Rachel Reeves will likely need to implement measures on tax and spending to address the financial gap. The manufacturing sector was the main driver of growth in August, expanding by 0.7%, while the services sector, encompassing industries like retail and hospitality, showed no growth during the same period.
Although there was a slight improvement in economic growth over a rolling three-month period, with a 0.3% expansion in the three months to August, analysts remain cautious about the outlook. Household costs for essentials are on the rise, and the uncertainty surrounding potential tax increases in the Budget is expected to dampen activity for both households and businesses. The meagre growth in August, combined with ongoing challenges in various sectors, suggests that GDP growth may not see significant acceleration in the near future.
Despite the IMF’s prediction that the UK will be the second-fastest-growing economy among advanced nations this year, concerns about inflation rates and weak economic growth persist. The Treasury aims to stimulate growth by supporting businesses, investing in infrastructure, and reducing bureaucratic barriers. However, opposition figures like Shadow Chancellor Mel Stride and Liberal Democrat Treasury spokesperson Daisy Cooper criticize the government for not taking sufficient action to kickstart economic growth. As discussions continue on the best approach to address economic challenges, the impact of various policies on businesses and households remains a critical point of contention
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