The UK economy expanded by 0.4% in July, exceeding forecasts and following a 0.3% growth in June and no growth in May. This positive performance was primarily fueled by the services sector, which saw a 0.4% increase. Production rose by 0.2% and construction by 0.1% in July.
The Office for National Statistics (ONS) highlighted the information and communication sector as a key driver of growth. Output from computer programming, consultancy, and related activities, which includes AI firms, climbed by 3.7% in Q2 2026, building on a 3.8% gain in the previous quarter. This sustained growth indicates that AI-related demand is significantly impacting the UK's overall economic performance.
Investment data supports this trend, with spending on plant and machinery reaching $22.1 billion in the second quarter. The ONS attributed this strength mainly to ICT equipment, particularly computer hardware, alongside government spending on weapons systems. Berenberg's senior UK economist, Andrew Wishart, interprets this as evidence of the compute build-out required to run AI boosting business investment. Additionally, British manufacturers of computing, optical, and electronic products saw a substantial 10.7% year-on-year increase in output, making it the top-performing manufacturing sub-sector for the first time since early 2017.
This economic growth, partly attributed to AI, coincides with Prime Minister Andy Burnham's initiative to make AI a Cabinet-level priority, signaling a shift towards British ownership and tech sovereignty. The ONS director of economic statistics, Liz McKeown, noted that the overall growth in Q2 2026 was 0.4%, following a 0.6% increase in Q1 2026, with the services sector increasing by 0.5% in Q2. Strong contributors included information and communication, and professional, scientific, and technical activities, which rose by 2.7% and 1.7% respectively. The impact of the Men's football world cup and a heatwave in July were also cited as factors influencing economic activity.
