UK Economy Grows 0.4% in July, Beating Forecasts

Britain’s economy expanded by a stronger-than-expected 0.4% in July, maintaining solid momentum from the first half of 2026 despite economic pressures linked to the U.S.-Iran war, according to data released Friday by the Office for National Statistics (ONS).

The July GDP increase significantly exceeded economists’ expectations. A Reuters poll had forecast no monthly growth after the UK economy also expanded 0.4% in June.

On an annual basis, UK economic output rose 1.6% in July, marking the fastest year-over-year growth since February 2025. The result also surpassed economists’ forecast for a 1.2% increase.

Growth across the three months through July remained at 0.4%, matching the pace recorded in the three months through June. Economists had expected growth to ease to 0.3%.

ONS Director of Economic Statistics Liz McKeown said continued strength in Britain’s services sector helped offset declines in production and construction. She also noted signs that growing adoption of artificial intelligence was supporting software development.

Britain’s economy grew 1% during the first half of 2026, representing the strongest performance among the Group of Seven major advanced economies. However, some economists have cautioned that seasonal factors may have contributed to the comparatively strong figures.

The Bank of England forecast in July that UK GDP would grow 1.1% for the whole of 2026. Governor Andrew Bailey told a parliamentary committee this week that recent economic data had been “a bit stronger” than he previously expected.

Britain and other European economies have so far experienced a smaller growth impact from the U.S.-Iran conflict than initially feared. However, economic risks remain elevated as the war drives energy prices higher.

Oil prices climbed above $105 per barrel this week, increasing inflationary pressures and contributing to higher government borrowing costs. The Bank of England expects UK inflation to reach around 3.2% later this year, potentially complicating the outlook for interest rates and economic growth.