UK Economy Grows 0.4% in July as IT Sector Surges Past Declines

Britain's economy extended its growth streak with a 0.4% gross domestic product expansion in July, beating economists' expectations for flat growth and marking an eighth consecutive three-month expansion period, according to an Investing.com report. The broad services sector powered the gains, offsetting declines in industrial production and construction.

"Yet again, the UK economy surprised, and surprised in a good way," said Sanjay Raja, chief UK economist at Deutsche Bank, pointing to broad gains across telecoms, computer programming, finance, and a 0.9% rise in manufacturing output.

Output expanded 0.4% in the three months to July compared with the preceding three-month period. Leading the expansion was the information and communication sector, where computer programming, consultancy, and related activities surged 4.4% on a three-month basis.

Sector Divergence Across the UK Economy

While the services and tech segments propelled headline growth, traditional industrial and building sectors moved in the opposite direction. Production output fell 0.5% in the three months to July, and construction dropped 0.5% over the same timeframe.

The contraction in construction was driven largely by an 8.4% slump in public housing new work alongside a steady decline in private housing repairs and maintenance across the country.

Are GDP Figures Overstating Recovery Strength?

The sharp divergence between surging tech-related services and contracting industrial output has sparked a debate among economists over whether official GDP figures accurately capture the broader economic reality.

"We still think the GDP figures are overstating the true pace of economic growth," said James Smith, developed markets economist at ING, noting that IT accounts for just 7% of the economy but has driven roughly a third of annual GDP growth.

This heavy reliance on a single high-value sector leaves the broader recovery vulnerable to shifts in tech spending. Policymakers tracking these indicators must weigh whether the concentration of growth in IT and consultancy represents a sustainable productivity boom or an isolated pocket of strength hiding persistent weakness in housing and manufacturing.