The UK economy grew by 0.4% in July, significantly outperforming expectations that growth would stall, according to official figures released this morning.
Data from the Office for National Statistics showed gross domestic product increased by 0.4% during the month, while the economy also expanded by 0.4% across the three months to July.
Economists surveyed ahead of the figures had expected monthly GDP to remain unchanged.
The unexpectedly strong performance was driven largely by the services sector, which grew by 0.4% during July.
ONS Director of Economic Statistics Liz McKeown said computer programming again made the largest contribution to services growth, with businesses linked to the artificial intelligence boom helping to support economic activity.
Some businesses also benefited from activity surrounding the men's football World Cup and the unusually warm summer weather.
Annual growth reaches 1.6%
The figures represent a significant improvement on expectations and continue a stronger-than-anticipated run for the British economy.
GDP was 1.6% higher in July than during the same month last year, the strongest annual rate of growth since February 2025 and above forecasts of around 1.2%.
The UK economy expanded by 1% during the first half of 2026, making Britain the fastest-growing economy among the G7 during that period.
Budget pressure remains
The latest figures come despite significant economic uncertainty caused by higher global energy prices and continuing geopolitical tensions.
Oil prices above $100 a barrel have increased concerns that higher energy costs could fuel another rise in inflation and place additional pressure on household finances and government borrowing costs.
The figures will nevertheless provide some encouragement for Chancellor John Healey as he prepares for his first Budget next month.
Healey this week pledged to remove barriers to investment and growth, announcing measures aimed at supporting technology businesses and increasing investment across the country.
Bank of England watching closely
Economists remain divided over whether the recent momentum can be sustained.
Some expect growth to slow during the remainder of the year, while others believe the strength of recent economic data could lead forecasters to upgrade their projections for Britain's economy.
The Bank of England forecast in July that the UK economy would grow by 1.1% during 2026.
Governor Andrew Bailey has since acknowledged that economic data has been somewhat stronger than the Bank had expected.
Attention will now turn to the Bank of England's next interest-rate decision and forthcoming inflation figures, particularly amid renewed concerns over energy prices.
The latest GDP figures are preliminary estimates and may be revised as further economic data becomes available.