Economy set to shrink ahead of Budget in ‘difficult’ outlook

The UK economy is expected to have shrunk in August, despite hopes that the stronger-than-expected growth seen in June and July would continue. The latest gross domestic product (GDP) data, which will be released on Thursday, is expected to show a contraction of 0.1 per cent in August, according to City economists polled by Bloomberg. The UK’s crucial services sector had enjoyed a “stonking” start to the summer but signs of a shrinking economy will pile further pressure on Chancellor John Healey, who has been warned he will have to make difficult decisions at this month’s Budget. The economy grew by 0.3 per cent in June and 0.4 per cent in July, as record temperatures boosted the hospitality sectors and the services industries took a lift from AI. But experts have said the positive start to Andy Burnham’s leadership as Prime Minister is likely to have stumbled in the latest data. Growth to slow sharply Robert Wood, chief UK economist at Pantheon Macroeconomics, pre