---
title: "UK economy beats forecasts with 0.4 percent growth in July"
publisher: "Stockmark.IT"
author: "Stockmark.IT Website"
published: "2026-09-12T08:10:29+00:00"
modified: "2026-09-12T08:10:29+00:00"
date: 2026-09-12
canonical: "https://stockmark.it/ai-boom-helps-drive-surprise-uk-growth-in-july/"
category: "Economy"
categories: ["Economy", "Financial", "UK Economy"]
image: "https://i0.wp.com/stockmark.it/wp-content/uploads/2026/09/uk-economy-beats-forecasts-with-0-4-percent-growth-in-july.png?fit=1536%2C1024&quality=80&ssl=1"
format: "news"
language: "en-GB"
---

# UK economy beats forecasts with 0.4 percent growth in July

**Published:** September 12, 2026
**Author:** Stockmark.IT Website
**Categories:** Economy, Financial, UK Economy
**Featured image:** ![UK economy beats forecasts with 0.4 percent growth in July](https://i0.wp.com/stockmark.it/wp-content/uploads/2026/09/uk-economy-beats-forecasts-with-0-4-percent-growth-in-july.png?fit=1536%2C1024&quality=80&ssl=1)

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The United Kingdom’s economy expanded by 0.4 per cent in July, outperforming analyst expectations of zero growth, with the Office for National Statistics attributing part of the surge to increased activity in the artificial intelligence sector. The data, released by the ONS, indicates that the services industry, and specifically computer programming, provided a significant boost to overall economic performance. This positive result follows a period of mixed economic signals, with the economy having grown by 0.3 per cent in June after recording no growth in May. For the three-month period ending in July, the economy grew by 0.4 per cent compared with the previous quarter, offering a clearer view of underlying economic trends.

Liz McKeown, the ONS director of economic statistics, stated that there is evidence that businesses involved in AI and related technologies helped to boost the sector not only in July but also in the preceding months of May and June. While the ONS noted that many IT businesses reporting the largest turnover appear to be involved with AI, it acknowledged that quantifying the exact impact of the technology remains difficult. McKeown also highlighted that warm weather and the football World Cup influenced business activity in July, although she noted that these effects varied across industries, benefiting some firms while creating challenges for others.

Experts have interpreted the July figures as a sign of resilience in the face of external shocks, including the conflict in Iran. Paul Dales, chief UK economist at Capital Economics, commented that the data showed the resilience of the economy in the first half of the year had continued into the second half. However, he warned that higher energy prices and borrowing costs would soon begin to impact growth, particularly if the recent increases are sustained. The war in Iran has led to a sharp rise in oil prices, which has subsequently fed through to higher energy and fuel prices, placing pressure on both households and businesses. This rise in costs has raised concerns that inflation may remain elevated, increasing the likelihood that central banks will raise interest rates to control price rises.

The Bank of England is scheduled to meet next week to discuss interest rates. While economists widely expect rates to be held steady, some have predicted an increase before the end of the year. In response to the data, Chancellor John Healey stated that the economy was demonstrating welcome resilience despite serious global uncertainty. He noted that although growth remained fragile, it was the fastest in the G7 in the first half of the year. Healey acknowledged that the conflict in the Middle East had domestic impacts, affecting the cost of the weekly family shop and government borrowing. He is set to present his first Budget in October and has expressed a desire for people to feel confident about the economy, despite acknowledging the challenge of historic high borrowing costs.

Opposition figures and other economists have offered more cautious assessments. Shadow Chancellor Andrew Griffith argued that the government should not celebrate the latest figures, pointing to shrinking construction and production sectors, rising unemployment, and the highest government borrowing rates in almost 30 years. Yael Selfin, chief economist at KPMG, suggested that the strong headline growth figure masks a weaker picture for households. She noted that consumer-facing services contracted in July, with retail and hospitality activity falling after earlier summer increases. Selfin warned that higher energy and fuel prices would place further pressure on household budgets, while elevated mortgage rates would continue to weigh on housing activity and wider consumer spending.

Richard Carter, head of fixed interest research at Quilter Cheviot, cautioned that the growth seen in July may not last, especially as activity is likely to stall ahead of the Budget. He observed that the war in the Middle East continues to drive much of the economic data, with the UK being particularly exposed to the fallout. Carter added that calls for pro-growth measures would likely intensify as the Budget approaches, though whether the government has the fiscal room to act remains to be seen. Meanwhile, Rob Arnold, co-founder of AI firm Ascendea, believes the UK has not yet realised the full economic growth potential of the technology. He argued that the government needs to invest more in the sector and in training companies on how to use AI safely, noting that some small UK-based AI firms are considering moving to the United States due to a lack of domestic support.

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