UK economy unexpectedly grows in August despite fall in consumer spending

The UK economy unexpectedly continued to grow in August despite a fall in consumer spending before chancellor John Healey’s budget.

Figures from the Office for National Statistics showed gross domestic product (GDP) rose by 0.1% last month, compared with 0.4% growth in July. City economists had forecast the economy would shrink by 0.1%.

With less than a fortnight before Healey’s budget, the latest figures come as the war in the Middle East rattles the global economy and hits British households and businesses with a surge in energy costs.

Against a volatile backdrop, the chancellor is under pressure to use his tax and spending address to the Commons on 28 October to announce a package of support to soften the blow. However, he will face a delicate balancing act amid a sharp increase in government borrowing costs.

In recent months, Britain’s economy had shown more resilience than had been expected at the start of the Iran war after recording the strongest rate of growth in the G7 in the first half of 2026. Official figures suggested a strong expansion in AI-related business activity as one factor behind the surprise rise.

In a fillip for the chancellor, the International Monetary Fund this week upgraded its UK growth forecastsfor this year, but warned that it expected a modest slowdown in 2027 as higher energy prices take their toll.