UK economy sees surprise growth in August ahead of Healey's first Budget

The UK's economy grew slightly in August, according to the last set of official figures before John Healey's Budget.

With the chancellor planning to set out his tax and spending plans later this month, the Office for National Statistics (ONS) said the economy expanded by 0.1%, which was better than analysts had expected.

The small increase follows growth of 0.4% in July, as well as positive upgrades to the outlook for Britain's economy from global watchdog the International Monetary Fund (IMF).

But Healey still faces a challenge to deliver a balanced Budget without turning to more borrowing.

Britain's economy was boosted in August by an increase in production, which includes manufacturing, oil and gas extraction and energy supply.

The services industry, which makes up the largest chunk of the UK's economy, was flat during the month, while the construction sector contracted.

Over the three months to August, the UK's economy grew by 0.7% overall. ONS director of economic statistics Liz McKeown said computer programming had been the biggest contributor to what she described as "robust" growth over the period.

But she said the production and construction sectors shrank over the three-month period.

As well as August's growth figure being stronger than expected, an earlier estimate for June's monthly growth was revised up from 0.3% to 0.4%.

Paul Dales, chief UK economist at Capital Economics, said Britain's economy was "more robust than we thought".

He warned that an expected increase in inflation would still "dampen growth", but added that the economy was showing "remarkable resilience to higher energy prices and borrowing costs".

PwC senior economist Jake Finney said the development of AI infrastructure was underpinning Britain's relatively strong performance.

"The UK still lags the US in both the scale of that investment and the boost it provides to growth, but it is making progress and remains ahead of many of its European peers," he added.

The latest growth figures were released after Healey landed in Bangkok for the annual meeting of the International Monetary Fund (IMF).

Earlier this week, the global financial watchdog praised the UK's plans to cut debt levels, with global borrowing costs on the rise, with managing director Kristalina Georgieva adding that the country was seeing "a bit of a better growth prospect" than other G7 nations.

Arriving in Bangkok on Thursday, Healey said: "I'm pleased the IMF here in Bangkok backed our economic plans in London.

"They say the UK stands out on growth despite the deep economic shocks that are affecting worldwide at present."

He promised to "stay the path" as he prepares to deliver the Budget in two weeks' time.