UK Economy Grows 0.4% in July as AI Boom Lifts Computer Programming Businesses

Britain’s economy grew at the fastest annual pace in 18 months in July, with gross domestic product 1.6% higher than a year earlier, according to Office for National Statistics figures released on Friday.

“British gross domestic product in July was 1.6% higher than a year earlier”

Reuters

The ONS also showed the economy grew 0.4% on the month in July, while growth in the three months to July was also stronger than expected at 0.4%.

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Liz McKeown, the ONS director of economic statistics, said much of the growth over the past three months appeared to come from businesses involved in computer programming benefiting from the AI boom.

The Reuters report said the figures offered a boost to new finance minister John Healey ahead of his first budget on October 28, even as soaring government borrowing costs and surging oil prices risk overshadowing the data.

James Smith, a developed markets economist at ING, said, "The UK economy has performed much better than expected amid the fallout of the Iran war," while Liz McKeown added that services drove growth in July with computer programming making the largest contribution.

The Reuters report said the conflict this week pushed oil prices above $105 a barrel, with knock-on impacts on government borrowing costs at multi-decade highs, and the Bank of England expects inflation to rise to around 3.2% later this year.

BBC

Almost all economists polled by Reuters expected the Bank of England to keep interest rates on hold next week and for the rest of this year, but financial markets think it is near certain that rates will rise by November.

In a separate report, Sky News said rising energy costs are threatening a slowdown in the months ahead as the ONS figures suggest resilience to date, and it quoted Liz McKeown saying, "Within services, computer programming was the largest contributor".

The Guardian said the July expansion was driven by growth of 0.4% in the services sector, particularly admin services, and computer programming and consulting, with the ONS noting that many of the businesses reporting the largest turnover were involved in activities related to artificial intelligence and cloud computing.

“"Britain’s economy is demonstrating a welcome resilience, despite serious global uncertainty"”

The Guardian

The Guardian also quoted John Healey saying, "Britain’s economy is demonstrating a welcome resilience, despite serious global uncertainty," while warning that growth was "still fragile" and that the conflict in the Middle East has impacts at home from the cost of the weekly family shop to the cost of government borrowing.

Sanjay Raja, chief UK economist at Deutsche Bank, said, "The UK growth story is becoming harder to ignore," as households and businesses continued spending despite the unfolding energy shock.

The Reuters report framed the data as a boost to Healey ahead of his first budget on October 28, while noting that it may make some Bank of England officials more willing to consider a rate hike before the end of the year.