GDP rose 0.4% as ONS data show resilience — though analysts caution the calm may not survive a turbulent autumn of rising energy costs and bond-market turmoil.


The UK economy grew by 0.4% in July, official figures from the Office for National Statistics showed, extending a pattern of steadier-than-expected performance through the first half of the year. But economists were quick to warn that the reading may prove to be the high-water mark before conditions turn.

Anna Leach, Chief Economist at the Institute of Directors, said the data continued "this year's pattern of resilient growth", with particular strength in computer programming, where the ONS pointed to activity linked to AI and cloud computing. The challenge now, she argued, was whether that resilience could withstand a much tougher autumn. With the Iran conflict intensifying, oil back above $100 a barrel, gas prices at their highest since late 2022, and financial conditions tightening markedly, Leach warned these developments would raise inflation, squeeze household incomes and business margins, and weigh on spending and growth.

Ben Jones, Senior Lead Economist at the CBI, struck a similar note. Stronger-than-expected growth in July suggested the economy had carried some of its first-half momentum into the third quarter, he said, and had proved more resilient to the fallout from the Middle East conflict than initially seemed likely. Even so, he expected the second half of the year to be "a bit more challenging", with higher household energy bills beginning to bite and a global bond-market sell-off pushing up borrowing costs. Business surveys had become less pessimistic than earlier in the year, Jones added, but the improvement remained tentative.

Julian Jessop, Economics Fellow at the Institute of Economic Affairs, was blunter still, describing July's figures as "the calm before the next storm". Much of the recent strength in services, he said, reflected tailwinds that were already fading, including the initial boost to consumer spending from the hot weather. The persistent weakness of the construction sector, meanwhile, confirmed that the government had yet to "fix the foundations". One tailwind looked likely to last longer, in Jessop's view: the surge in spending on AI-related goods and services, which he said went some way towards explaining recent improvements in the productivity data.

That good news, though, was now being overtaken by events. Jessop pointed to fresh headwinds from energy prices and the bond markets, arguing that the UK economy was "still lurching from crisis to crisis". The surge in the cost of government borrowing would heap further pressure on the Chancellor, he said, who was far more likely to respond with fresh tax rises than with spending cuts. Nor was it easy to see how the Bank of England could keep interest rates on hold once inflation resumed its climb above target.

All three economists pointed towards the Budget as the moment that would settle which way the economy tips. Leach noted the tension between the Chancellor's declared wish, voiced on Monday, to "draw the line" under rising business costs, and the decision days later to grant mayoralties new powers to levy tourist taxes; she called for the Budget to bring "much-needed coherence" to economic policy if the government was serious about rebuilding business confidence. Jones agreed that firms would be watching closely for how the Chancellor's ambitions on investment, innovation and jobs translated into concrete action on the cost of doing business.

For Jessop, the verdict on the government's growth strategy so far was withering. John Healey had "said some of the right things" in his Growth Speech on Monday, he acknowledged — but the gap between rhetoric and reality seemed as wide as ever.