UK economy unexpectedly grew by 0.4% in July

The UK economy unexpectedly grew by 0.4% in July following a boost from the services industry and businesses increasing the use of AI, official figures show.

It marks a surprise uplift after economists were expecting the economy to show zero growth for the month.

The figures will come as welcome news to Chancellor John Healey who earlier this week insisted that the UK economy was “turning a corner”, as he prepares to deliver his first autumn Budget statement next month.

The ONS said the services sector drove growth in July, with output increasing by 4%, and computer programming making the largest contribution.

Artificial intelligence (AI) and related technology has helped to boost the sector over the past three months, according to the ONS.

Its evidence showed that across computer programming, consultancy and IT activities, many of the businesses reporting the largest turnover in July were involved in activities related to AI and cloud computing.

It comes amid a wider AI investment boom, with businesses increasingly spending on infrastructure and training to accelerate their use of the technology.

GDP growth in July was also helped by a 0.2% increase in production output, driven by growths in manufacturing and water supply, including sewerage and waste management, the ONS said.

Construction output also increased by 0.1%, helped by housing repair and maintenance work.

Meanwhile, the impact from the heatwaves on spending in pubs and restaurants was down in July compared with June, which had been helped by record hot weather and the Fifa World Cup kicking off.

ONS director of economics statistics Liz McKeown said: “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.”