Today has brought us up to date on the latest growth figures from the UK economy and they are something of a disappointment.
Monthly GDP is estimated to have grown by 0.1% in August 2025, following a fall of 0.1% in July 2025 (revised down from no growth in our previous bulletin) and a growth of 0.4% in June 2025.
We are in effect back where we thought we were before this release because the downwards revision for July cancels out the August rise. I had Sky News on earlier and they have missed the revision. But the important point is rather troubling because whilst the ersatz quarterly figure is relatively okay it relies on a June reading that is about to drop out of the figures.
Real gross domestic product (GDP) grew by 0.3% in the three months to August 2025 compared with the three months to May 2025, a slight increase following growth of 0.2% in the three months to July 2025.
Looking ahead we already know that the PMI number was weaker in September.
At 50.1, down from 53.5 in August, the seasonally adjusted S&P Global UK PMI Composite Output Index dropped to its lowest level for five months and signalled broadly unchanged volumes of business activity across the private sector economy. Service sector activity increased marginally in September, but manufacturing production fell to the greatest extent for six months.
It is far from a perfect guide as 53.5 would you think lead to stronger growth than 0.1%.But a drop of over 3 points should be telling is something. Plus there was more news of the downbeat variety this morning.
Nestle has unveiled plans to cut around 16,000 jobs around the world over the next two years, as it turns to automation to help reduce costs.
Nestle has a factory in Dalston although it is not known where the 16,000 jobs will be cut from. ( ITV News)
That will be further ahead and we do not know the detail but there are fears for UK jobs. In a sign of the times Nestle shares are up 8%.
What happened in August?
Services
As you can see below that sector seems to have stagnated for two months in a row.
Services output is estimated to have experienced no growth in August 2025. This is the second consecutive month in which services has shown no growth, after also doing so in July 2025 (revised down from 0.1% growth in our previous bulletin). 7 of the 14 subsectors showed growth in August 2025.
Does anybody know what is going on in rental and leasing?
The largest positive contribution to services growth in August 2025 came from administrative and support service activities which grew by 1.0%. This was mainly caused by a 5.3% increase in rental and leasing activities.
On a monthly basis it seems rather extreme but there does seem to be an upwards trend.
This subsector saw its largest period of growth since July 2020. It has now grown for the last nine consecutive months, in line with widespread growth in this industry.
That last sentence is troubling though as our official statisticians seem to be telling us that it has grown in line with itself?
The next area in line is if we are positive perhaps a sign that the government is trying to boost the health service and NHS.
Human health and social work activities was the second-largest contributor to services growth in August 2025. Output increased in this subsector by 0.4% during the month, and there was growth in both market and non-market sectors.
The catch is that following the French model may not be the sharpest plan presently if events over there are any guide. Plus with the problems with the public finances this is a concern.
On the other side of the coin there was this.
The largest negative contribution at the subsector level in August 2025 came from wholesale and retail trade; repair of motor vehicles and motorcycles, where output fell by 0.5%, this fall was driven by a 2.0% decrease in wholesale trade, except of motor vehicles and motorcycles.
Output also decreased in arts, entertainment and recreation (down 2.4%) and transport and storage (down 0.7%) in August 2025.
Production
Here there was an August bounce although it merely offset the July drop.
On the month, production output is estimated to have risen by 0.4% in August 2025, following a revised fall of 0.4% in July 2025 (revised up from a fall of 0.9% in our previous bulletin).
However taking the two months together we are 0.5% higher than we thought we were and manufacturing had a better August.
The increase in output in August 2025 was mainly caused by manufacturing output, which grew by 0.7%.
If we switch to energy there was a good bit and a bad bit.
Electricity, gas, steam and air conditioning supply grew by 0.4%, and water supply; sewerage, waste management and remediation activities grew by 0.3%. These increases were partially offset by a 2.3% fall in mining and quarrying.
More on that later.
Construction
Over the years this has been the most problematic sector for the Office for National Statistics. This precedes its current malaise as for example around a decade ago the numbers were “fixed” via a reclassification of a large business from services to construction. Thus I have frequently warned about this area and sadly it seems to have got worse. The contacts I have suggest this area is struggling and in recession, whereas the official series maybe is finally starting to recognise this.
Monthly construction output is estimated to have fallen by 0.3% in August 2025, after showing no growth in July 2025 (revised down from 0.2% growth in our previous bulletin).
But overall it still claims there has been growth.
Construction output is estimated to have increased by 0.3% in the three months to August 2025 compared with the three months to May 2025.
More Perspective
If we look at the annual comparisons we rather curiously match the forecasts of the International Monetary Fund.
GDP is estimated to be 1.3% higher in August 2025, compared with the same month a year ago.
Perhaps the IMF looked backwards rather than forwards.
Energy Policy Problems
This is a serious problem area for the UK as I note this.
Over this period, services grew by 1.8%, construction grew by 1.3%, and production fell by 0.4%.
I mean the production figures as it is hard to see that changing with our sky high electricity costs. Being positive there may be some hope.
Britain’s biggest energy supplier has told MPs that bills are on track to climb by a fifth in the next four years, even if wholesale markets plummet, because of the rising cost of government policies.
An executive at Octopus Energy said household energy bills were likely to rise by 20% unless the government took radical action to address the burden of increasing “non-commodity costs”, even in a scenario where wholesale electricity prices fell by half. ( The Guardian)
What I think is significant here is that energy minister Ed Miliband and his policies have lost the support of Octopus Energy. They have pivoted to admitting that the claims of “cheaper” in fact mean ever higher prices. In the past he has been able to rely on the support of companies like them.
I think that there are also signs of a shift in that The Guardian is reporting this. Presumably it is hoping the public have forgotten its past claims about renewable energy.
But for now the present government seems to think it can still get away with misleading the public
A government spokesperson said: “We categorically reject this speculation. Wholesale gas costs for households remain 75% higher than they were before Russia invaded Ukraine in 2022, and the main reason energy bills remain high.”
Looking back to October 2021 the ICE Gas future was quite a bit more than double what it is now.
Comment
As you can see whilst looking backwards the UK has had some growth it is nothing spectacular and the mood music is for a slowing. Combined with us having higher inflation than our peers it looks as though stagflation is on the menu. Plus if we look deeper there are clear issues with GDP measurement. Below is a scandal which precedes this government as frankly the energy policy of the Conservatives was awful. But in the arena of GDP we see what would have been counted as activity should have been a negative.
98% of homes with external wall insulation installed under the government’s ECO scheme require work to correct major issues that will cause problems such as damp and mould. ( National Audit Office)
If we skip the obvious institutional incompetence we will have seen a positive impact on GDP when in terms of output it was a clear negative.For those that drill deeper we see a difference between the income version where people have been paid so a positive and the output version which is clearly negative. Then we will have a further addition to GDP from the corrective work.
What a mess! I feel sorry for those who had this inflicted on them as we know the authorities will have looked the other way for a s long as possible.
