“The UK economy continued to wrongfoot expectations in August as strong manufacturing output helped power better-than-expected growth, despite mounting financial pressures on households and businesses.
“The slowdown in AI-related activity suggests firms were using innovation as a near-term defensive tool to bolster resilience against this year’s economic headwinds, rather than a catalyst for sustained productivity growth.
“August’s uptick is likely to be followed by a more sluggish September, as rising oil and gas prices, mounting inflation and pre-Budget uncertainty undermine confidence and squeeze finances, sapping economic activity.
“While August’s unexpected uptick all but confirms that the OBR will raise its growth forecast for this year from 1.1% to 1.4%, the Chancellor still faces a major Budget headache, as elevated borrowing costs eat into fiscal headroom and increase pressure for tax rises.
“These unexpectedly upbeat figures will further embolden hawkish sentiment among policymakers by reinforcing the view that the economy is strong enough to withstand a rate rise, making a November hike look highly likely.”
ENDS
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* includes parent companies. Source: ICAEW member data March 2026, Interbrand, Best Global Brands 2025.
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