UK Economy Shows Stronger Momentum Ahead of October Budget

The UK economy is showing signs of stronger momentum across business activity and household sentiment ahead of Prime Minister Andy Burnham's government's first budget in October. Recent surveys indicate that the services sector has risen to a six-month high, beating all economist forecasts. The S&P Global Purchasing Managers' Index shows the services sector rising to 52.8 in August from 52.1 in July.

Official figures also show the economy expanding by 0.3% in June and by 0.4% over the second quarter, led by services. Manufacturing sentiment is improving, with the Confederation of British Industry's measure of order books reaching its highest level since November 2024. Consumer confidence is also increasing, with GfK saying its headline index rises to minus 14 in August from minus 17 in July.

Despite these improvements, economists still warn that the near-term improvement does not remove deeper risks facing the UK economy. Public finances remain strained, and borrowing costs could rise further if inflation stays persistent across advanced economies. Consumer price growth is widely expected to move above 3% in the coming months, while the ongoing U.S.-Israeli war on Iran keeps uncertainty high around global energy prices.