The UK economy expanded by 0.4% in July, exceeding analyst expectations of zero growth, according to the Office for National Statistics (ONS). The growth was driven by strong performance in the services sector, particularly computer programming, with AI adoption playing a notable role. ONS director Liz Mc Keown noted AI-related businesses contributed to growth across May, June, and July, though exact impact remains difficult to quantify.

Warm weather and the football World Cup also influenced activity variably across sectors. In the three months to July, the economy grew 0.4% compared to the prior quarter, signaling underlying resilience. Rob Arnold of AI firm Ascendea said the UK has not yet realised AI’s full economic potential, citing faster, cheaper development but warning of insufficient government support, with some firms considering relocation to the US.

Paul Dales of Capital Economics highlighted continued resilience into the second half of the year but warned that rising energy prices and borrowing costs—exacerbated by the Iran conflict—would likely dampen future growth. Chancellor John Healey praised the growth as the fastest in the G7 in the first half of the year, while acknowledging fragility and global uncertainty. Shadow chancellor Andrew Griffith countered that construction and production are shrinking, unemployment is rising, and government borrowing remains at near-30-year highs.

Yael Selfin of KPMG noted the headline figure masks weaker household conditions, particularly in consumer-facing services.