The UK economy grew 0.4% in July, beating economists’ expectations for no change as the services sector led the expansion. The stronger data adds to evidence of resilience in the British economy, although surging oil prices are increasing inflation and interest-rate risks.
The UK economy expanded 0.4% in July 2026, exceeding economists’ expectations for no growth and extending a stronger-than-expected performance during the first half of the year, official data showed on Friday.
The monthly increase in gross domestic product followed 0.3% growth in June and was above the flat reading forecast by economists in a Reuters poll. GDP was also 1.6% higher than a year earlier, marking the fastest annual growth since February 2025.
The services sector was the main contributor to July’s expansion, growing 0.4%. The Office for National Statistics said computer programming and related activities were particularly strong, with businesses involved in artificial intelligence and related technologies contributing to growth.
Computer programming and consultancy output increased 4.4% over the three months to July, highlighting the growing contribution of AI-related activity to the UK economy. Manufacturing also expanded 0.9% in July, while construction grew 0.1%.
The latest figures add to a relatively strong first half of 2026. The British economy expanded by 1% during the first six months of the year, according to Reuters, giving the UK the fastest first-half growth among the Group of Seven major advanced economies.
However, the stronger economic performance comes as Britain faces renewed inflation pressure from sharply higher energy prices.
Oil prices have risen above $100 a barrel amid escalating conflict involving Iran and disruptions around key Middle East shipping routes. Higher energy costs could feed into consumer prices and increase pressure on the Bank of England to keep interest rates higher for longer or raise them again.
Financial markets have already responded to the inflation risks. UK government bond yields have risen sharply, with the 10-year yield approaching 5.4% and the 30-year yield nearing 6%, according to Reuters. Markets are increasingly pricing the possibility of additional Bank of England rate increases through 2027.
The Bank of England is expected to leave its benchmark interest rate unchanged at 3.75% at its next meeting. Governor Andrew Bailey has warned that rising energy prices pose upside risks to inflation.
The stronger July growth therefore provides a mixed signal for policymakers: economic activity is proving more resilient than expected, but the renewed rise in energy costs could make it more difficult to bring inflation back toward the central bank’s target.
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