UK growth edged past forecasts — a small push towards a November rate rise.

The call

The news. The economy grew 0.1% in August. Forecasters expected it to shrink 0.1%.

What it means for the pound. A small beat, not a strong economy. But it weakens one argument for the Bank of England to keep waiting. With inflation at 3.1% and three members already voting to raise, it could lean a few more towards a rise on 5 November. Higher rates would make the pound more attractive to hold.

Direction. Leaning up, into 5 November.

Conviction. Low on its own. It builds if inflation on 21 October comes in firm.

Why the pound could go up from here

The Bank held at 3.75% in September by six votes to three. The six who held are weighing 3.1% inflation against an economy that looked to be slowing. A print showing it still growing, even slowly, makes the case for waiting a little harder to argue. It does not settle it.

The detail is more encouraging than the headline. The growth came from business — computer programming and AI-related investment led over three months, and manufacturing rose 1.2%. Over the year the economy grew 2.1%, its fastest since August 2022. That points to some underlying momentum, though one month is a thin basis for it.

The weak spot

Households. Spending in restaurants fell 2.7% and on leisure 7.1%, and services overall did not grow. Tax rises are expected in the Budget later this month. If consumers weaken further, the members holding back have their argument back.

What builds the case next

21 October — UK inflation for September. A firm number would strengthen the case for November considerably. This is the bigger test.

Later this month — the Budget. Heavy tax rises on households would work against the call.

5 November — Bank of England decision.

Sources

ONS — GDP monthly estimate, August 2026 · Eastern Herald — Bank of England vote, consumer services · Invezz — forecast, annual growth · FXStreet — Budget risk