London Daily

Focus on the big picture.
Saturday, Aug 01, 2026

Truss and Kwarteng's main plan has been growth - the shrinking figures look like a failing govt

Truss and Kwarteng's main plan has been growth - the shrinking figures look like a failing govt

The latest economy figures show how far away the government's 2.5% growth target is.
The problem for a government that sets a target to grow the economy above all else is that every month it gets a scorecard on progress, and this morning it looks like it's failing.

Strictly speaking, the 0.3% contraction in gross domestic product (GDP) announced for August is not the responsibility of Liz Truss and Kwasi Kwarteng, who have only been in office since 6 September (though the tumult of the last five weeks may make it feel like longer).

But having set an ambition of 2.5% long-term growth and making economic expansion the guiding, and perhaps only, principle of their administration, it does demonstrate the scale of the challenge they and the country face.

The contraction in August was much worse than forecasters expected. Most were betting on a modest amount of growth, even allowing for the depressing effect on productivity of the last summer bank holiday.

Instead there was a decline led by production, which fell 1.8% in the month, with manufacturing of pharmaceuticals and transport equipment the biggest fallers by sector.

There was also downward movement as a consequence of the continued reduction in test and trace and the scale of the vaccine program, a reminder that almost everything counts towards GDP, from the cost of your morning coffee to a GP appointment.

Business Secretary Jacob Rees-Mogg made light of the decline in GDP, telling Sky News that the figure was only a forecast, saying "these figures are very often revised so we should be careful at over-interpreting them".

He is certainly right about revisions. To demonstrate, the ONS revised its July figure for GDP, downwards. It said that as a consequence the economy contracted in the three months to August.

The GDP figure announced may well be revised but arguing about decimal-point changes in output misses a wider point about the challenges facing the economy.

Even before Truss and Kwarteng moved into Downing Street the economy was flatlining, and the Bank of England expects a five month recession to begin this month.

One of the biggest pressures is the ongoing labour squeeze, a factor highlighted as cross-sectoral by the ONS.

"Staff shortages continued to be an issue for businesses with difficulties being reported by businesses working in road haulage, hire of catering equipment, repair and maintenance of motor vehicles, hotels, restaurants and coffee shops, and employment agencies," it reports.

On Tuesday it was revealed that long-term sickness is at a record high with almost 2.5 million unable to work because of illness, and we know almost one in five of those over 50 are on an NHS waiting list.

Add the barriers of Brexit and there are more unfilled vacancies than there are people classified as unemployed, a sign the labour market is struggling to meet current demand, let alone future growth.

And thanks to market volatility, triggered at least in part by Mr Kwarteng's "mini-Budget", businesses now face a steep increase in borrowing costs, while consumers could be challenged by mortgage increases in excess of what they have saved on energy bills thanks to government support.

Add the wider question of financial market stability and confidence in the government's fiscal plan, built around unfunded tax cuts that leave an estimated £60bn hole in the public finances, and it is a deeply challenging environment.

The ONS will be along with the latest score this time next month.
Newsletter

Related Articles

0:00
0:00
Close
Finland Deploys Commercial-Scale Thermal Batteries Using Crushed Rock to Store Renewable Grid Energy
Valued at $109 Million: F-35B Fighter Jet Crashes in Southern California
Sainsbury Agrees to Sell Argos in £120 Million Deal to Private Consortium
High Court Clears Way for Construction of Chinese Embassy at Royal Mint Court
UK Fuel Prices Climb to Multi-Month Highs as Strait of Hormuz Tensions Disrupt Oil Supplies
Severe Summer Drought and Record Heat Put UK Harvests at Risk
Prime Minister Andy Burnham Faces Labour Backbench Opposition Over Potential Support for New North Sea Oil and Gas Drilling
Bank of England Warns Inflation Will Stay Above 3% as Middle East Energy Shock Prolongs Cost-of-Living Pressures
Andy Burnham has Announces Plans to Redistribute Income Tax Revenue to English Mayors
Early-Release Scheme Faces Fresh Scrutiny as Reoffending and Prison Recalls Rise
Police Phone Checks Followed Report on Murder of MI5 Agent Inside Sinn Féin
Archbishop of Canterbury Reaffirms £100 Million Reparative Justice Fund During Ghana Visit
Charities Allege French Police Used Tear Gas Against Channel Migrants
Norwegian Teenager Convicted Over Iran-Linked Murder Plot in Britain
Christian Organisations File Charity Complaints Against Amnesty International UK
Ofgem Tightens Grid Connection Rules for New Data Centres
FTSE 100 Reaches Record High Despite Global Technology Sell-Off
Millions of UK Households Urged to Check Eligibility for Winter Energy Discount
Labour Restores Parliamentary Whips to Diane Abbott and Joani Reid
UK Supreme Court to Hear Challenge Over Palestine Action Ban
UK Commits More Than £8.4 Billion to Dreadnought Nuclear Submarine Programme
England Declares Severe Drought as Wildfire Burns Near Sizewell Nuclear Site
Bank of England Holds Interest Rates at 3.75% as Middle East Tensions Fuel Inflation Risks
Drought Status Extended Across All of Wales as Heat and Dry Weather Deepen Environmental Strain
Record-Low Danube Exposes Probable Mammoth Remains in Bulgaria
UK Business Confidence Climbs to Four-Month High
Greater Manchester Gains Expanded Powers Under Regional Funding Reforms
UK Supreme Court to Hear Appeal Over Palestine Action Terror Ban
Shell's Quarterly Profit Doubles to Nearly $10 Billion on Higher Energy Prices
UK Government Removes VAT From Household Electricity Bills
Exceptional Drought Grips Half of England as Wildfire Threatens Sizewell
Bank of England Holds Interest Rates at 3.75% as Inflation Risks Persist
US Says It Has Carried Out Heavy Strikes on Iran After Attempted Attacks on Its Forces
The chief executive of the popular gaming company laid off many employees and his pay rose to 38 million dollars
UK Employment Holds Steady as Wage Growth Remains Moderate
England to Introduce Artificial Intelligence into Secondary School Curriculum
Wales Launches £1.2 Billion Industrial Regeneration Programme
High Court Upholds UK Digital Surveillance Framework
Northern Ireland Reaches Budget Agreement on Infrastructure and Public Sector Pay
Home Office Expands Digital Border Checks Nationwide
UK Approves Major North Sea Wind and Carbon Capture Project
The World's Most Terrifying Smartphone: Recording, Documenting, and Reporting to the Regime
Scotland Approves Major Renewable Energy Expansion
UK and United States Sign AI and Semiconductor Cooperation Pact
UK Treasury Tightens Fiscal Controls After Gilt Market Volatility
Bank of England Holds Interest Rates at 4.5%
UK Unveils £10 Billion NHS Funding Overhaul and Workforce Reform
The AI User Nightmare: Private Claude Conversations Leaked to the Internet
UK: Former Football Association Leaders Call for World Cup Boycott Over FIFA Privatization Plan
Forbidden Love: China severs millions from their virtual partners
×