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Gloucestershire Business News

UK GDP bounces back with modest 0.2% growth

According to the latest figures from the Office for National Statistics (ONS), the monthly gross domestic product (GDP) is estimated to have grown by 0.2% in August 2023, following a fall of 0.6% in July 2023. 

This modest rise reduces the risk of the UK going into recession, according to some economists.

GDP measures the value of goods and services produced in the UK and estimates the size of and growth in the economy.

Looking at the broader picture, GDP increased by 0.3% in the three months to August 2023, with growth in all sectors.

Services output rose by 0.4% in August 2023 and was the main contributor to the growth in GDP.

Output in consumer-facing services fell by 0.6% in August 2023 after a fall of 0.2% in July 2023 and production output fell by 0.7% in August 2023 after falling by 1.1% in July 2023.

The construction sector fell by 0.5% in August 2023 after a fall of 0.4% in July 2023, revised up from a 0.5% fall as previously forecast.

Jeremy Hunt, chancellor, said the figures were a sign of the resilience of the UK economy and stated: "The UK has grown faster than France and Germany since the pandemic and today's data shows the economy is more resilient than expected.

"While this is a good sign, we still need to tackle inflation so we can unlock sustainable growth."

Darren Morgan, ONS director of economic statistics said: "Our initial estimate suggests GDP grew a little in August, led by strong growth in services which was partially offset by falls in manufacturing and construction.

"Within services, education returned to normal levels, while computer programmers and engineers both had strong months.

"Across the last three months as a whole, the economy has grown modestly, led by car manufacturing and sales, and construction."

Tina McKenzie, policy and advocacy chair of the Federation of Small Businesses, (FSB), said: "This modest rise in August's GDP is a relief, coming on the heels of the sharp drop recorded in July.

"The recovery in services has driven the increase, but this masks concerning falls in production and construction, indicating that there are downward pressures on many sectors.

"Today's figures will go some way to allaying fears that the summer was a wash-out for small firms, although our research has consistently found that confidence levels in some sectors - especially consumer-facing ones such as retail and hospitality - have trailed behind the overall results for all sectors.

"The early September pause in the upward march of the base rate has given small firms a ray of hope that the margin squeeze they're enduring may ease.

"As we've seen in recent months, growth is volatile, and fears of a recession have yet to be fully banished. If this most recent monthly rise is to be sustained, the Government will need to consider how it can promote a trading environment where small firms can flourish.

"It's imperative for the Government to extend the 75% business rates discount for retail, hospitality, and leisure firms beyond its current expiry date of April next year. It's been a lifeline for thousands of small businesses and its continuation would limit the need for jarring price rises next April in consumer-facing sectors.

"Extending the VAT threshold to £100,000 would be another smart move to support economic growth.

"The blueprint for a thriving economy hinges on supporting small housebuilders. Small construction enterprises deserve a seat at the Government planning table, and by introducing brownfield development incentives and allowing the Community Infrastructure Levy to be paid at a project's end rather than the beginning, we can lay the groundwork for strong GDP and economic recovery.

"The millions of small business owners and self-employed people make up a powerful voting bloc, and they will be looking to the Autumn Statement for policies which will help them achieve their ambitions, and which will help the economy overall."

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