UK Economy Grows 0.4 Percent in July as Services Drive Expansion

The UK economy grew in July as services, production, and construction all expanded. British Chancellor John Healey said the UK’s economy was showing resilience despite higher costs linked to conflict in the Middle East.

The Office for National Statistics (ONS) said on Friday that the UK’s monthly gross domestic product (GDP) increased by 0.4 percent in July, after rising 0.3 percent in June and remaining flat in May.

The latest figures also showed the economy continued to expand over a longer period. Real GDP grew 0.4 percent in the three months to July from the previous three-month period.

Healey welcomed the latest figures, describing the economy as resilient despite continuing external pressures.

“Our growth, though still fragile, was the fastest in the G7 in the first half of the year,” Healey said in a Sept. 11 post on X.

“While the conflict in the Middle East is affecting costs at home, Britain’s economy is demonstrating resilience. We’re shifting power to local areas and backing business to drive growth.”

Healey’s comments came as higher oil prices and borrowing costs continue to weigh on the world’s fifth-largest economy, which has been hit by spiking energy prices caused by the Iran war.

Kallum Pickering, chief economist and deputy head of research at Peel Hunt, said the figures were about as strong as the UK could have hoped for given the uncertain economic backdrop.

“With uncertainty high at home and risks building abroad, a 0.4 percent MoM gain in UK real GDP in July, alongside an eighth consecutive three-month expansion, is about as good a print as the UK could have hoped for this morning,” he said on Friday.

Services Drive Rise

Stronger performance in professional services such as scientific research, legal work, and advertising, as well as technology services, including software development and IT consulting, drove the growth.

Business support services, such as equipment leasing, building maintenance, and landscaping, also contributed.

“Looking at the latest month, services also drove growth in July, with computer programming again making the largest contribution,” said ONS’s director of economic statistics, Liz McKeown.

She added that the men’s soccer World Cup in the summer and unusually hot weather provided an additional boost for some businesses.

Labour MP Darren Jones said the figures showed the UK economy continued to outperform expectations and remained the fastest-growing in the G7 in the first half of the year.

He also highlighted in a Sept. 11 post on X what he described as the “outsized role” AI and cloud computing businesses played in driving growth.

In its July forecast, the Bank of England (BoE) projected the economy would grow 1.1 percent in 2026.

Speaking to UK lawmakers this week, BoE Governor Andrew Bailey said economic data released since then had been “a bit stronger” than he had expected.

GfK’s Consumer Confidence Index, a monthly survey that measures how optimistic households are about the economy and their personal finances, rose to -14 in August from -17 in July, amid a change in UK political leadership.

Andy Burnham officially became leader of the UK’s governing Labour Party on July 17, replacing Keir Starmer as prime minister.

Production, Manufacturing

July saw industrial production rise 0.2 percent after contracting in the previous two months. Stronger manufacturing activity and gains in water supply, sewerage, and waste management contributed.

The increase was partly offset by weaker output from the mining and quarrying sector and lower electricity and gas production.

Manufacturing output climbed 0.9 percent, reversing declines in May and June, with the biggest gains coming from producers of computer and electronic equipment and pharmaceutical products.

Those increases were partly offset by weaker production of rubber and plastic products, construction materials, and machinery.

The stronger-than-expected data comes ahead of Healey’s first Budget on Oct. 28, when the government is due to set out its fiscal plans.

Pickering said the ONS data were likely to have greater political than monetary policy significance, coming ahead of the government’s Budget announcement.

Reuters contributed to this report.