# UK economy grows 0.1% in August, beating forecasts

> The British economy expanded in August despite weak services and construction, with annual growth hitting its strongest pace since August 2022.
- Title: UK economy grows 0.1% in August, beating forecasts · CNBC
- Summary: The British economy expanded in August despite weak services and construction, with annual growth hitting its strongest pace since August 2022. UK GDP grew…
- Keywords: uk economy, gdp growth, august 2026, office for national statistics, john healey, autumn budget, cost-of-living crisis, business, finance, economy, grows, August
- Source: CNBC — https://cnbc.com/2026/10/15/uk-gdp-august-2026-economy.html
- Author: Chloe Taylor
- Published: 2026-10-15T06:04:42+00:00
- Read time: 1 min
- Topics: uk economy, gdp growth, august 2026, office for national statistics, john healey, autumn budget, cost-of-living crisis, business, finance
## UK economy beats expectations
The UK economy grew 0.1% in August, surpassing economist forecasts of a 0.1% contraction. Production growth of 0.8% offset weakness in services and construction.
## Annual growth hits three-year high
On an annual basis, GDP grew 2.1% in August, beating expectations of 1.7%. The Office for National Statistics said it marked the highest year-on-year reading since August 2022.
## Growth slowing from earlier pace
August's 0.1% growth marked a slowdown from June and July, when the economy expanded 0.4% month-on-month. Services showed no growth and construction fell 0.2%.
## Markets react to stronger data
The British pound jumped 0.4% against the US dollar following the release. Yields on UK government bonds fell across the curve, with the benchmark ten-year gilt down nine basis points to 5.3364%.
## Healey faces budget pressure
Finance minister John Healey will deliver his first budget on October 28. Analysts said the slowdown in growth adds pressure as he balances fiscal rules with promises to ease cost-of-living pressures.
## Fiscal headroom squeezed
Joe Nellis of MHA said rising debt interest costs have severely constrained fiscal headroom. Raising taxes carries considerable risks to consumer spending and investment, while unfunded spending could unsettle financial markets.

> Rising debt interest costs have severely constrained fiscal headroom, with long-term government borrowing costs remaining exceptionally high.
## UK remains fastest growing G7 economy
Sanjay Raja of Deutsche Bank noted the UK economy remains the fastest growing G7 economy.Despite headwinds ahead, he said UK GDP growth hit 1.

> It's hard to overstate how strong the U.K. performance has been all year.
## Key takeaway

UK GDP grew 0.1% month-on-month in August, beating economist expectations of a 0.1% contraction, and 2.1% year-on-year, the strongest since August 2022.