UK economy unexpectedly grows 0.4% in boost for Burnham
Developed over time first seen 2 months ago
The UK economy grew by 0.4% in July, confounding economists who had forecast no growth at all and providing a welcome boost for the government ahead of the autumn Budget. The Office for National Statistics said growth accelerated from 0.3% in June, driven mainly by the services sector, with computer programming making the largest contribution amid increased use of artificial intelligence. Chancellor John Healey pointed to the figures as evidence of an "optimistic story" of an economy "turning a corner", though analysts cautioned that momentum could stall as businesses turn cautious in the run-up to the Budget.
Services output rose 0.6% across the three months to July, while the production sector contracted by 0.5% over the same period, even as manufacturing itself rose by 0.5%, led by computer, electronic and optical products and machinery. The ONS's Liz McKeown noted that, as in June, warm weather and the FIFA World Cup had affected business activity, with mixed effects across industries. Analysts at Quilter Cheviot welcomed the surprise strength but warned growth had been inconsistent across sectors, while the British Chambers of Commerce urged ministers to use the mid-October Budget to cut employer National Insurance for under-25s, ease energy and business rates costs, and bolster export support.
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In short
- UK GDP grew 0.4% in July, beating forecasts of zero growth
- Services sector, boosted by AI and computer programming, led the gains
- Manufacturing rose but wider production sector shrank over three months
- Budget submissions urge tax and cost relief for businesses ahead of October Budget
How this story developed
- 2 months ago The UK economy grew by 0.4% in July, official figures show, confounding economists who had forecast no growth at all and offering a welcome boost for the government.
- 2 months ago The UK economy grew unexpectedly by 0.4% in July, according to official figures from the Office for National Statistics, defying economists' predictions of zero growth for the month.
- 2 months ago The UK economy grew by 0.4% in July, confounding economists who had forecast no growth at all and providing a welcome boost for the government ahead of the autumn Budget.
Full account
The UK economy grew by 0.4% in July, according to official figures from the Office for National Statistics, confounding City forecasts of flat growth and marking an acceleration from the 0.3% expansion recorded in June. The unexpected reading offers a rare piece of good economic news ahead of a difficult autumn for the government, with ministers pointing to it as evidence that the economy is proving more resilient than anticipated despite a challenging international backdrop.
The ONS attributed the bulk of the growth to the services sector, singling out computer programming and consulting as the strongest contributors, alongside a lift in administrative services. Officials noted that many of the firms reporting the largest turnover gains were involved in artificial intelligence and cloud computing, suggesting that continued investment in AI-related technology has been feeding through into measured output over recent months. Industrial production also edged up, with a rise in manufacturing offsetting weaker figures for mining and for electricity and gas supply, while over the three months to July the economy expanded at the same 0.4% pace as the three months to June, a period the ONS regards as a more reliable gauge of the underlying trend.
Government figures welcomed the data cautiously. Transport secretary Heidi Alexander called the growth positive news achieved against a difficult global environment, pointing to the UK's position as the fastest-growing economy in the G7 during the first half of the year, while stressing that ministers would not become complacent and needed to work with local leaders to spread growth more widely. Chancellor John Healey had already been arguing that the economy was turning a corner. The figures land weeks before Healey's first budget, expected on 28 October, with commentators noting that steadier growth could ease some of the pressure he faces, even as rising global oil prices and higher borrowing costs linked to recent geopolitical tensions complicate the fiscal picture.
Economists offered a more guarded assessment of what the figures mean going forward. Martin Beck of WPI Strategy welcomed the AI-driven investment as the kind of productivity-boosting activity the economy needs, particularly given weakness elsewhere. Others cautioned that the resilience should not be overstated: rising oil prices were flagged as a risk to inflation and future borrowing costs, with some analysts suggesting the chancellor could still face pressure to raise taxes or cut spending at the budget. Despite the stronger-than-expected growth, economists including Suren Thiru of the ICAEW said they did not expect the data to push the Bank of England towards an interest rate rise at its next meeting, with policymakers still hoping a subdued economy will help bring inflation down over time.
Where outlets differ
From the full account, which is AI-written from the sources:
The Independent frames the story around Andy Burnham and Greater Manchester's political stake in the figures and leads on Heidi Alexander's reaction, whereas the second source barely mentions Burnham and instead centres the story on Chancellor John Healey and the upcoming budget.
The second source places much greater emphasis on the geopolitical backdrop, linking the growth figures directly to the fallout from the Iran conflict, rising oil prices and their implications for inflation and interest rates — themes absent from the Independent's account.
The Independent includes an ONS comment attributing some of the effect to warm weather and the FIFA World Cup, a detail not present in the second source.
The second source provides additional detail on industrial production (+0.2%) and the three-month GDP trend, plus named economist reactions (Martin Beck, Suren Thiru) assessing the budget and interest rate outlook, none of which appear in the Independent's report.
The Independent quotes the ONS's Liz McKeown only on the weather/World Cup point, while the second source quotes her on the services and computer programming drivers of growth.
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The case for
Supporters of the government's reading of these figures argue that beating economist forecasts, however modestly, is a genuine and welcome signal that the economy has more underlying resilience than gloomier commentators suggested. They point to broad-based services growth, a G7-leading first half of the year, and a rising tech and AI-driven contribution from computer programming as evidence of real economic dynamism rather than a fluke. On this view, ministers are entitled to highlight the data as cause for cautious optimism, especially since they have paired it with explicit warnings against complacency and pledges to spread growth beyond London and the South East.
The case against
Sceptics would argue that a single month's 0.4% figure should not be over-read, particularly when the ONS itself flags that unusual factors such as warm weather and the FIFA World Cup distorted business activity in both June and July. They would note that one good data point does not offset a longer run of sluggish growth, and that headline GDP figures can mask weak productivity, stagnant living standards, or uneven gains across regions and income groups. There is also a reasonable concern that any government facing difficult fiscal decisions has an incentive to amplify favourable short-term data, making a degree of scepticism about the political framing entirely legitimate.
Explained simply
The economy has been struggling to grow for some time, so any monthly figures from the Office for National Statistics attract close attention, particularly for what they suggest about the government's economic record. The 0.4% growth reported for July was better than the flat performance economists had expected, following on from growth of 0.3% in June, and much of it came from the services sector, including computer programming.
Chancellor John Healey and Transport Secretary Heidi Alexander are the government's key voices responding to the figures, both framing them as evidence of progress, though the reference to "Burnham" points to how the results are also being weighed politically, given speculation about Andy Burnham's ambitions within the Labour Party. The UK's economic performance matters because it affects living standards, tax revenues and the government's room for manoeuvre in future budget decisions.
These figures arrive as the government tries to build confidence in its economic management ahead of further fiscal choices, and as it faces questions about whether growth is being felt evenly across the country rather than concentrated in particular sectors or regions.
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