The UK economy expanded by 0.4% in July, exceeding analyst expectations, with growth supported by the services sector and AI-related businesses.
Key facts
- •The UK economy grew by 0.4% in July, following 0.3% growth in June and zero growth in May.
- •The ONS reported that the economy grew by 0.4% in the three months to July compared to the previous three-month period.
- •Chancellor John Healey is scheduled to present his first Budget in October.
- •Consumer-facing services, including retail and hospitality, contracted in July according to KPMG.
- •Rising oil prices resulting from the war in Iran have contributed to increased energy and fuel costs for households and businesses.
The UK economy grew by 0.4% in July, a figure that surpassed analyst predictions of zero growth. According to the Office for National Statistics (ONS), the expansion was supported by a strong performance in the services sector, particularly within computer programming and businesses utilizing artificial intelligence.
By the numbers
AI and Sector Performance
The ONS reported that many IT businesses with the highest turnover appear to be involved with AI, which has contributed to growth throughout May, June, and July. While the exact impact of AI remains difficult to quantify, ONS director of economic statistics Liz McKeown noted its role in boosting the sector. Additionally, some businesses reported that warm weather and the football World Cup influenced activity levels in July, though these factors created varying outcomes across different industries.
Economic Outlook and Challenges
Despite the July growth, economists warn that the economy faces significant headwinds, including rising energy and fuel prices linked to the war in Iran. Experts suggest that these costs, combined with high borrowing rates, may slow growth in the coming months. While Chancellor John Healey highlighted the resilience of the economy, Shadow Chancellor Andrew Griffith pointed to shrinking production and construction sectors as areas of concern. The Bank of England is scheduled to meet next week to discuss interest rates, with some analysts anticipating potential hikes to manage inflation.
Timeline
- MayThe UK economy experienced zero growth.
- JuneThe UK economy grew by 0.3%.
- JulyThe UK economy grew by 0.4%.
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This article was independently rewritten by ManyPress editorial AI from reporting originally published by BBC Business.
