New figures show UK economy grew in August by 0.2%

Manufacturers and business interest groups are reacting to newly released figures which show that the UK economy returned to growth in August, expanding by 0.2%.

Factors behind the expansion are said to include a strong month for manufacturers and bounce-backs in the retail and construction industries. The UK economy had previously failed to grow in June and July.

Despite this news, organisations including the Office for National Statistics (ONS) has warned that overall economic growth is weakening, despite the marginal improvement in August.

Liz McKeown, director of economic statistics at the ONS, states: "The broader picture is one of slowing growth in recent months, compared to the first half of the year."

Responding to reports of August 2024 GDP figures for the UK, business interest group, The Confederation of British Industry (CBI), also stated that momentum in the economy is a little weaker than was expected a few months ago, with growth remaining uneven across sectors.

Ben Jones, lead economist at CBI, comments: “Our surveys suggest that businesses may have tapped the brakes again in September amid speculation over potential budget announcements.

“Anecdotally, it’s clear that some firms have paused hiring and investment decisions pending more clarity over the direction of the new government’s economic policies. With the chancellor’s first budget only weeks away, the government has an opportunity to build momentum behind the economic recovery by demonstrating it has a credible plan for boosting the country’s growth trajectory.”

The UK government will set out its tax and spending policies in the Budget on October 30^th. Prime minister Sir Keir Starmer recently stated that the upcoming budget will be "painful", with the government admitting that taxes will rise.

Among the rumoured tax rises is a potential increase in National Insurance (NI) contributions for employers. Despite the Labour Party’s previous pledge on not raising National Insurance, it is unclear if this pledge applies to the element of the tax paid by employers.

Adrian Hanrahan, managing director of chemicals exporter Robinson Brothers, spoke on BBC Newsnight about the potential for NI increases, saying: "I really feel like as a manufacturing company in this country we are a sitting duck for taxes,” adding: “We are easy prey.”

Earlier in the year, it was reported that UK inflation had fallen to the Bank of England’s 2% target for the first time in three years. According to a report from credit management company Atradius, this represented a major milestone for economic recovery.

Speaking at the time of the announcement, head of commercial at Atradius James Burgess said: “We’re finally seeing signs of life in the UK economy, and this is feeding through into improvements in business health. We’ve seen rising business confidence, even if it does remain fragile.”

But Burgess also warned that businesses needed to prepare for economic setbacks down the line. “It’s crucial that businesses remain vigilant and protect themselves against the domino effect of insolvency with proactive financial planning. This includes increasing liquidity, diversifying supply chains, and protecting vulnerable credit agreements with insurance.”

In September, manufacturer’s organisation Make UK reported that Britain’s manufacturers have yet to see an immediate boost from a change of government.

According to the findings of a report concerning Q3 2024, built by Make UK alongside accounting firm Binder Dijker Otte (BDO), the outlook was mixed. Almost six in ten manufacturers expected better growth over the next 12 months according to the report. However, output figures had reportedly turned negative for the first time in four years.

Make UK called on the UK government to publish further details on industrial strategy, including making a greater commitment to long-term, large scale infrastructure projects that will, according to the organisation, “make the UK a more attractive place to invest.”