UK economy grew faster than expected in July

The UK's economy grew faster than expected in July partly helped by businesses using artificial intelligence (AI).

The economy expanded by 0.4%, the Office for National Statistics (ONS) said, whereas economists had predicted no growth.

The expansion was helped by a strong performance from the services sector, and particularly computer programming.

Experts said July's growth figure showed the UK economy was proving resilient in the face of shocks such as the war in Iran, but said they expected growth to slow in the months ahead as high energy prices affect households.

July's figure follows growth of 0.3% in June and zero growth in May.

According to the ONS director of economic statistics, Liz McKeown, there was evidence that businesses involved with AI and related technologies helped to boost the sector, not just in July but in May and June as well.

She also said some businesses had said that the warm weather and football world cup had affected activity in July, although she said the effects "differed across industries, benefitting some businesses while creating challenges for others".

The ONS said that in the three months to July, which gives a better underlying picture, the economy grew by 0.4% compared with the previous three months.

Chancellor John Healey said the economy, was "demonstrating a welcome resilience, despite serious global uncertainty".

"Our growth although still fragile was the fastest in the G7 in the first half of the year," he added.

"But, the conflict in the Middle East does have impacts here at home - from the cost of the weekly family shop to the cost of government borrowing."

Paul Dales, the chief UK economist at Capital Economics, said July's data showed "the resilience of the economy in the first half of the year continued into the second half".

However, he added that higher energy prices and borrowing costs would soon start to hit growth, especially if the rises seen this week are sustained.

Yael Selfin, chief economist at KPMG, said while the headline growth figure was strong, it "masks a weaker picture for households".

"Consumer-facing services contracted in July, as retail and hospitality activity fell following earlier increases in activity in the summer," she said.

"Higher energy and fuel prices are likely to place further pressure on household budgets, while elevated mortgage rates will continue to weigh on housing activity and wider consumer spending."

Richard Carter, the head of fixed interest research at investment firm Quilter Cheviot, said: "Growth is going to be hard to come by so this may not last, especially as activity is likely to stall ahead of the Budget.

"The war in the Middle East continues to drive a lot of the economic data, but the UK is the most exposed to the fallout," he said.

"Calls for pro-growth measures will get louder as the Budget nears, but whether or not the government has the room to act remains to be seen."

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