UK economy grows 0.1% in August as Healey readies first Budget on 28 October

Growth beats forecasts

The Office for National Statistics reported on Thursday, 15 October, that GDP rose 0.1% in August after 0.4% growth in July. Economists had expected a 0.1% decline for the month, and the rise was led by strong factory production. A three-month reading to the end of August shows growth of 0.7%. Sarah Breeden, the Bank of England's deputy governor, said she was surprised by how well the economy had absorbed the energy price shock linked to the conflict in the Middle East.

So we've been surprised so far about how well the economy has absorbed what has been a pretty significant energy price shock.

Speaking to CNBC, Breeden said firms had learned lessons from the 2022 energy shock and that many are hedged, which lowers the shock they feel. She also cited AI investment, including data centres, as supporting activity. The Bank is still working out whether the private sector's ability to absorb the shock means its effect is reduced or only delayed.

2026-07

0.4

2026-08

0.1

2026-07

0.4 %

2026-08

0.1 %

Healey's first Budget

John Healey, speaking to journalists in Bangkok at the IMF annual meetings, said he wanted the Budget to give Britain "breathing space" while keeping its fiscal plans strong. He will stick to the spending plans set by his predecessor, Rachel Reeves, and cabinet colleagues must find any extra money within existing budgets. Healey said departments are being asked to reprioritise, and the IMF has praised the government's plan to tackle its deficit. The IMF's managing director, Kristalina Georgieva, urged the government to "stay the course". The Budget on 28 October is expected to include a further package of energy support, ahead of an expected sharp rise in the energy price cap in January. The government has already cut VAT on electricity bills.

Tax questions

Healey declined to say whether he would raise taxes on banks or capital gains tax to offset pressure from higher energy prices and government borrowing costs. He warned that Britain faced a "tough time" amid rising borrowing costs and slowing growth. He also said speculation before past budgets had been damaging:

If you think back to the run-up to previous budgets, the speculation about what was set to be in those budgets was actually deeply damaging.

In a Bloomberg TV interview, Healey said banks are part of the "jewel" in the UK's economic crown and added that "They're a big contributor to the economy". Some City bosses fear he will hike taxes on the industry at the Budget.

Households and the data calendar

Evidence suggests more households feel squeezed by soaring fuel, energy and mortgage costs, and some are taking on more debt. The ONS publishes unemployment and wage figures on Tuesday, 20 October, and the unemployment rate has plateaued at 4.9%, after reaching 5.2% in early 2026. Inflation figures follow on Wednesday, 21 October, after the annual rate eased to 2.6% in June before rising to 2.9% in July and 3.1% in August.

2026-06

2.6 %

2026-07

2.9 %

2026-08

3.1 %

Another rise in September is expected, which would take inflation further from the Bank of England's 2% target, after it peaked at 11.1% in 2022-23. September's inflation figure is typically used to set several tax and cost increases, which gives it particular weight for the Treasury.

1. Oct 15, 2026ONS publishes August GDP showing 0.1% growth
2. Oct 20, 2026Unemployment and wage figures due
3. Oct 21, 2026Inflation figures due
4. Oct 28, 2026Chancellor's first Budget and tax and spending statement