UK economy bucks expectations (Image: HarryDaniels)
- Services power July’s expansion - AI-related activity boosts computer programming - Higher energy prices threaten momentum - BoE expected to hold rates next week
LONDON – The UK economy continued to show surprising resilience in July, defying expectations of a slowdown heading into the second half of the year.
Gross domestic product expanded by 0.4% in July, Office for National Statistics data showed, beating the consensus forecast for no growth and June’s 0.3% increase.
“Looking at the latest month, services drove growth in July, with computer programming again making the largest contribution,” said Liz McKeown, ONS director of economic statistics.
“Separately, as in June, some businesses reported that the warm weather and FIFA World Cup had affected their activity, although effects differed across industries, benefitting some businesses while creating challenges for others.”
The less volatile three-month measure also showed growth of 0.4%, a tenth of a percentage point above expectations and unchanged from the three months to June.
Services output rose by 0.6% over the period, following a 0.5% increase in the three months to June. Production and construction partly offset those gains, each contracting by 0.5%. Production had been flat in the previous period, while construction had grown by 0.3%.
“Within services, computer programming was the largest contributor, continuing the strong growth seen throughout the year, with evidence that businesses involved with AI and related technologies helped to boost this sector,” McKeown said. “Continuing recent trends, research and development and rental and leasing also helped drive growth, while wholesaling saw a notable fall.”
Comforting news for Treasury
Source: ONS
The government welcomed the stronger-than-expected rise in output. Chancellor of the Exchequer John Healey said the economy was demonstrating resilience despite significant global uncertainty. “Our growth, although still fragile, was the fastest in the G7 in the first half of the year.”
Despite the stronger domestic data, analysts warned that the continuing conflict in the Middle East could weigh on confidence and activity.
Paul Dales, chief UK economist at Capital Economics, said July’s above-consensus rise in real GDP suggested that the economy’s resilience in the first half had carried into the second. But he cautioned that higher energy prices and borrowing costs would soon take a bigger toll, particularly if this week’s sharp increases were sustained.
Front-month Brent and US light crude futures have both traded above USD 100 a barrel this week, crossing that threshold for the first time since late July.
The UK’s 10-year gilt yield is trading around 5.35%, near multi-year highs.
MPC seen on hold
The economy’s resilience could strengthen the hand of hawkish members of the Bank of England’s Monetary Policy Committee.
“It is undeniable that the UK economy has performed better than widely expected amid the fallout of the Iran war,” said ING economist James Smith. He attributed that resilience partly to inflation having risen less than it might have.
“As for the BoE, it has long appeared sceptical about the UK’s growth figures. It has been relying instead on its own ‘survey-based’ metric of activity, which through the first quarter had run significantly cooler than the GDP figures had suggested. And in any case, it remains squarely focused on inflation.”
The Bank is widely expected to leave its Bank Rate unchanged at 3.75% next week. It will announce its decision on Thursday, 17 September.
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- Services power July’s expansion
- AI-related activity boosts computer programming
- Higher energy prices threaten momentum
- BoE expected to hold rates next week
By Harry Daniels
LiveSquawk News
@HarryDaniels71
14:00 GMT | 11 September 2026
LONDON – The UK economy continued to show surprising resilience in July, defying expectations of a slowdown heading into the second half of the year.
Gross domestic product expanded by 0.4% in July, Office for National Statistics data showed, beating the consensus forecast for no growth and June’s 0.3% increase.
“Looking at the latest month, services drove growth in July, with computer programming again making the largest contribution,” said Liz McKeown, ONS director of economic statistics.
“Separately, as in June, some businesses reported that the warm weather and FIFA World Cup had affected their activity, although effects differed across industries, benefitting some businesses while creating challenges for others.”
The less volatile three-month measure also showed growth of 0.4%, a tenth of a percentage point above expectations and unchanged from the three months to June.
Services output rose by 0.6% over the period, following a 0.5% increase in the three months to June. Production and construction partly offset those gains, each contracting by 0.5%. Production had been flat in the previous period, while construction had grown by 0.3%.
“Within services, computer programming was the largest contributor, continuing the strong growth seen throughout the year, with evidence that businesses involved with AI and related technologies helped to boost this sector,” McKeown said. “Continuing recent trends, research and development and rental and leasing also helped drive growth, while wholesaling saw a notable fall.”
The government welcomed the stronger-than-expected rise in output. Chancellor of the Exchequer John Healey said the economy was demonstrating resilience despite significant global uncertainty. “Our growth, although still fragile, was the fastest in the G7 in the first half of the year.”
Despite the stronger domestic data, analysts warned that the continuing conflict in the Middle East could weigh on confidence and activity.
Paul Dales, chief UK economist at Capital Economics, said July’s above-consensus rise in real GDP suggested that the economy’s resilience in the first half had carried into the second. But he cautioned that higher energy prices and borrowing costs would soon take a bigger toll, particularly if this week’s sharp increases were sustained.
Front-month Brent and US light crude futures have both traded above USD 100 a barrel this week, crossing that threshold for the first time since late July.
The UK’s 10-year gilt yield is trading around 5.35%, near multi-year highs.
The economy’s resilience could strengthen the hand of hawkish members of the Bank of England’s Monetary Policy Committee.
“It is undeniable that the UK economy has performed better than widely expected amid the fallout of the Iran war,” said ING economist James Smith. He attributed that resilience partly to inflation having risen less than it might have.
“As for the BoE, it has long appeared sceptical about the UK’s growth figures. It has been relying instead on its own ‘survey-based’ metric of activity, which through the first quarter had run significantly cooler than the GDP figures had suggested. And in any case, it remains squarely focused on inflation.”
The Bank is widely expected to leave its Bank Rate unchanged at 3.75% next week. It will announce its decision on Thursday, 17 September.