Services-led growth pushes UK economy ahead of forecasts
Developed over time first seen 2 months ago
The UK economy grew by 0.4% in July, comfortably beating economists' consensus forecast of no growth at all, prompting a broadly positive reaction from analysts at Capital Economics, the CBI and Quilter Cheviot. The figures extend the resilience seen through the first half of the year, with Britain's economy proving sturdier than expected despite the Middle East conflict, though commentators generally cautioned that this momentum may not be sustained given a number of headwinds building on the horizon.
Growth was recorded across all three main sectors, with services once again doing the bulk of the work, while production and construction showed a weaker picture over the three months to July. Analysts flagged rising household energy bills, higher borrowing costs, a global bond-market sell-off and uncertainty ahead of the Budget as risks to future activity, noting that monthly growth has been uneven, including a 0.1% contraction earlier in the period.
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In short
- UK GDP grew 0.4% in July, beating forecasts of zero growth
- Services sector drove the surprise expansion
- Analysts warn energy costs, borrowing costs and the Budget threaten momentum
How this story developed
- 2 months ago The Office for National Statistics itself confirmed the picture, formally pegging quarterly GDP growth to July at 0.4% and attributing the July acceleration chiefly to computer programming and digital services, a release that landed as a welcome boost for Chancellor John Healey's recent upbeat messaging on the economy.
- 2 months ago Economists reacted positively to fresh figures showing the UK economy grew 0.4% in July, far outpacing a consensus forecast of zero growth, with observers from Capital Economics, the CBI and Quilter Cheviot crediting the services sector while warning that energy bills, borrowing costs and Budget uncertainty could soon dent momentum.
Full account
The UK economy grew by 0.4 per cent in the three months to July, official figures showed, confounding economists who had pencilled in no growth at all for the month. The Office for National Statistics said the reading matched the pace recorded in the three months to June, with gross domestic product for the second quarter as a whole up 0.4 per cent. The surprise strength came despite a difficult backdrop of higher household energy costs, volatile bond markets and lingering uncertainty from the conflict in the Middle East, all of which economists had expected to weigh more heavily on output.
Growth was once again led by the services sector, which expanded by 0.6 per cent across the three months to July, more than offsetting a 0.5 per cent contraction in both production and construction. Computer programming was singled out by the ONS as the single largest contributor, extending a run of strong performance seen through the year, with officials pointing to businesses adopting artificial intelligence and related technologies as a factor behind the sector's resilience. Research and development, and rental and leasing, also added to growth, while wholesaling was flagged as a notable drag. Within production, manufacturing rose over the same period, led by computer, electronic and optical equipment and by machinery, even as the wider production measure fell.
ONS director of economic statistics Liz McKeown said growth had remained 'relatively robust', with services strength only partly offset by weakness in production and construction, and noted that businesses had again reported mixed effects from the warm weather and England's run to the World Cup semi-final, which helped some trades, such as pubs and hospitality, while creating difficulties for others. The figures landed after Chancellor John Healey had described an 'optimistic story' of an economy 'turning a corner', and he said Britain's growth, while still fragile, had been the fastest in the G7 over the first half of the year. The data also arrived during Andy Burnham's first weeks as Prime Minister, after his appointment in July. Not everyone was convinced: shadow chancellor Andrew Griffith argued the government had little to celebrate given shrinking construction and production sectors and rising unemployment.
City economists broadly welcomed the figures while cautioning that the second half of the year looks harder going. Capital Economics' Paul Dales said the resilience seen in the first half had carried into the second, though he warned that higher energy prices and borrowing costs would increasingly weigh on activity. The CBI's Ben Jones said the economy had proved more resilient to the fallout from the Middle East than expected, but flagged rising household energy bills and a global bond-market sell-off as headwinds. Richard Carter of Quilter Cheviot welcomed growth across all three sectors but warned that further gains would be 'hard to come by', particularly with activity likely to stall ahead of the Budget, expected in mid-October, and pointed to an inconsistent run of monthly figures this year, from a contraction in April to flat growth in May before the rebound of recent months.
Where outlets differ
From the full account, which is AI-written from the sources:
The Daily Mail framed the story around football and heatwave colour — Harry Kane, the World Cup semi-final and high-30s temperatures — and gave most space to the political clash between Healey and shadow chancellor Andrew Griffith, plus noted Andy Burnham's appointment as Prime Minister that month.
The Independent placed more emphasis on AI's role in driving services growth and included additional detail on manufacturing's contribution within the otherwise weak production sector, giving comparatively less space to political reaction.
The third source (an economists'-reaction piece) did not mention the football, weather or domestic political row at all, focusing instead on analyst commentary from Capital Economics, the CBI and Quilter Cheviot about energy costs, borrowing costs, the Middle East conflict's limited economic impact, and the outlook ahead of the October Budget.
Quilter Cheviot's Richard Carter was quoted in both the Independent and the economists' round-up making the same point about inconsistency in the UK's month-to-month growth figures, underlining that this caution was a shared theme among analysts even though the Mail's report did not include City reaction at all.
Left-leaning outlets 2
- UK economy unexpectedly grows 0.4% in boost for BurnhamThe Independent
- UK GDP report to show if economy kept growing in July –business liveThe Guardian
Only here: economy, unexpectedly, grows, boost, burnham
Right-leaning outlets 1
Only here: economic, growth, revealed, unchanged, days
Headline columns compared word for word; nothing in them is AI-written.
Explained simply
Rising prices, wobbly borrowing costs and the aftermath of conflict in the Middle East have made it hard to predict how the UK economy will perform, so official growth figures released periodically by the Office for National Statistics are closely watched. These figures measure gross domestic product, or GDP, which is the total value of goods and services produced in the country, and is the standard way economists judge whether the economy is expanding, stagnant or shrinking.
The UK economy relies heavily on its services sector, which covers everything from banking and retail to healthcare and hospitality, and this has consistently outperformed other parts of the economy such as manufacturing and construction in recent months. Commentators at organisations including Capital Economics, the CBI and Quilter Cheviot track these releases to gauge the country's resilience and to inform predictions about interest rates, government policy and household finances.
This matters because monthly growth has been erratic through the year, and the coming months bring added uncertainty from rising energy bills, higher borrowing costs, turbulence in global bond markets, and the government's upcoming Budget, all of which could influence whether the recent strength continues or fades.
Coverage · 3 sources
Bias meters
From 3 rated sources.
- Daily MailRightUK economic growth revealed to be unchanged at 0.4% – days after Chancellor insisted he wanted to ‘make Great Britain growth Britain’
- The IndependentLeftUK economy unexpectedly grows 0.4% in boost for Burnham
- The GuardianLeftUK GDP report to show if economy kept growing in July –business live
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