UK Economy Defies Forecasts With 0.4% Growth in July

The UK economy expanded by 0.4% in July, exceeding city economists' forecasts of zero growth and accelerating from the 0.3% increase recorded in June, according to data from the Office for National Statistics.

“Britain’s economy is demonstrating a welcome resilience, despite serious global uncertainty. Our growth although still fragile was the fastest in the G7 in the first half of the year. But, the conflict in the Middle East does have impacts here at home – from the cost of the weekly family shop to the cost of government borrowing,” said John Healey, Chancellor, in a statement regarding the figures.

Services Sector and AI Expansion

The unexpected July expansion was driven primarily by momentum across the services sector. Within that category, the ONS reported that firms registering the highest turnover in computer programming and consulting were heavily engaged in artificial intelligence and cloud computing operations.

Additional seasonal factors also shaped the monthly reading. Businesses across various industries reported mixed impacts from the warm weather and the FIFA World Cup.

“Some businesses reported that the warm weather and Fifa World Cup had affected their activity, although effects differed across industries, benefiting some businesses while creating challenges for others,” said Liz McKeown, Director of Economics Statistics, ONS, in a statement.

Economic Context Ahead of the Autumn Budget

The stronger-than-expected GDP print arrives as policymakers prepare for the upcoming autumn budget. While the G7 leading growth rate through the first half of the year provides a cushion, officials continue to monitor external pressures, including borrowing costs and international supply chain risks that influence domestic pricing.