UK Economy Grows 0.4% in July as Services Lead Expansion

The UK economy expanded by 0.4% in July, extending the recovery into the opening month of the third quarter as services remained the main source of growth. The increase followed 0.3% growth in June and no growth in May, according to the Office for National Statistics.

All three main sectors grew on the month. Services output rose 0.4%, production increased 0.2% and construction edged up 0.1%. The broader three-month picture was more uneven: GDP grew 0.4% in the three months to July, but that increase came from a 0.6% rise in services while production and construction each fell 0.5%.

The ONS said July GDP was 1.6% higher than a year earlier, while output in the three months to July was 1.3% above the same period of 2025. The agency’s July monthly GDP estimate also marked the eighth consecutive three-month period of growth, although the sector breakdown shows that the expansion is still being carried disproportionately by services.

Business-facing services carry July growth

Services output increased in eight of the 14 subsectors in July. The largest positive contribution came from administrative and support service activities, which grew 3.7%. Within that group, rental and leasing rose 7.9%, services to buildings and landscape activities increased 4.0%, and employment activities grew 2.5%.

Information and communication was the second-largest positive contributor, rising 2.4% on the month. Computer programming, consultancy and related activities grew 3.5% and alone added 0.14 percentage points to services output and 0.12 percentage points to overall GDP. The ONS said many of the businesses reporting the largest July turnover in computer programming and information services were involved in artificial intelligence and cloud computing, though it cautioned that its data do not allow the exact impact of those activities to be quantified.

The strength was less evident in areas tied more directly to household spending. Consumer-facing services fell 0.4% in July after rising 0.4% in June and 0.5% in May. Retail trade excluding motor vehicles fell 0.5%, while wholesale and retail trade and repair of motor vehicles and motorcycles declined 1.7%. Accommodation provided an offset, with output up 2.6%.

The split between business-facing and consumer-facing activity changes how the headline GDP number should be read. July was not simply a broad consumer rebound. A large part of the month’s services growth came from business support, technology and related activities, even as several consumer-facing categories weakened.

Production and construction improve on the month

Production output rose 0.2% in July after falling in both May and June. Manufacturing increased 0.9%, while water supply, sewerage, waste management and remediation activities rose 2.0%. Those gains were partly offset by a 4.4% fall in mining and quarrying and a 1.5% decline in electricity, gas, steam and air conditioning supply.

The monthly increase did not erase weakness over the latest three-month period. Production was down 0.5% in the three months to July compared with the three months to April. Manufacturing still grew 0.5% over that span, but declines in water and waste activities, energy supply, and mining weighed on the sector as a whole.

Construction showed a similar contrast between the latest month and the broader trend. Output grew 0.1% in July, driven by a 0.8% increase in repair and maintenance, while new work fell 0.4%. Across the three months to July, construction output declined 0.5%, with both new work and repair and maintenance lower than in the three months to April.

The divergence between monthly and three-month readings is useful because monthly GDP can be volatile. July’s gains across all three major sectors show a firmer start to the third quarter, but the rolling three-month data still point to a services-led economy rather than a synchronized acceleration across services, industry and construction.

Revisions and the Bank of England are the next tests

The July release contains no revisions to previously published monthly GDP figures. That will change soon. The ONS plans to open the full time series for revision in its next monthly GDP release on October 15, incorporating changes from Blue Book 2026 and the quarterly national accounts due on September 30.

Those revisions matter because monthly GDP is an early estimate based on the output approach, while quarterly GDP brings together output, income and expenditure measures. The current first estimate shows the economy grew 0.4% in the second quarter after a 0.6% increase in the first quarter. July therefore offers an encouraging first monthly reading for the third quarter, but it is not a complete measure of quarterly momentum on its own.

The figures also arrive shortly before the Bank of England’s next interest-rate decision. At its July meeting, the Monetary Policy Committee voted 6-3 to keep Bank Rate at 3.75%, with three members preferring an increase to 4%. In its July Monetary Policy Report, the Bank projected that underlying GDP growth would weaken slightly in the near term and put average UK GDP growth for 2026 at 1.1% in its central projection.

The July increase adds a firmer activity reading to the data set the MPC will assess, but one monthly GDP figure does not settle the underlying outlook. The committee’s next decision is due on September 17, followed by the ONS quarterly national accounts on September 30 and the next monthly GDP estimate on October 15, when the July history itself may be revised.