FX.co ★ UK's economy remains resilient to inflationary pressure

British businesses showed solid growth in August. The composite business activity index rose to 52.5 points, exceeding analysts' expectations. A value above 50 points indicates real economic expansion. The main driver was the services sector: banks, transportation companies, and the hospitality industry recorded strong domestic demand. This rise offsets the challenge faced by factories, which are struggling with high commodity costs and logistical disruptions. Barclays Bank forecasts a quarterly GDP growth of 0.2%, based on stable corporate purchases of equipment and software.

Inflation accelerates due to electricity tariffs

The consumer sector remains stable, although households have to deal with higher spending. The annual CPI grew to 2.9% in July following a planned increase in government tariffs on gas and electricity. At the same time, base prices for food and clothing remained relatively unchanged. The labor market remains calm: the unemployment rate has settled at 4.9%, and annual wage growth in private firms has slowed to 2.8%. This cooling reduces the risk of further inflation acceleration. Retailers maintained overall revenue growth throughout the summer, despite a decline following early June sales.

Budget borrowing exceeds plan

The UK government is borrowing more money than budgeted. By July, the government's net borrowing reached £57 billion, exceeding the Office for Budget Responsibility (OBR) estimates by £2 billion. By the end of the financial year, the total amount of borrowed funds is expected to rise to approximately £120 billion. Overspending is linked to increased costs related to servicing old debts and budget programs. Nevertheless, resilient business performance helps the economy maintain balance and avoid recession.