UK gross domestic product grew 0.4% in July 2026, beating stagnation forecasts

Monthly gross domestic product outpaces forecasts

The Office for National Statistics published data on Friday showing that the United Kingdom economy grew by 0.4% in July 2026. The expansion came in ahead of projections from financial markets and private sector economists, who had forecast gross domestic product to remain unchanged at 0.0% following a 0.3% rise in June. The July performance builds on a sequence of economic gains throughout the summer, after output recorded zero growth in May 2026. In the three months leading through July, economic activity expanded by 0.4%, matching the pace registered in the three months to June and outperforming the consensus expectation of a deceleration to 0.3%. The period covered by the release represents the final month of Sir Keir Starmer's premiership.

Sector performance across services and industry

Growth across the British economy during July was underpinned by positive contributions across multiple industrial categories, led primarily by the dominant services industry. Service sector activity rose by 0.4% in July, serving as the main driver of overall economic output. Output in the manufacturing and production sector grew by 0.2%, while the construction industry expanded by 0.1% over the same monthly interval. Statistics officials noted that activity in software development supported the broader services industry, where artificial intelligence adoption contributed to output. Liz McKeown, the director of economic statistics at the Office for National Statistics, addressed the composition of the monthly data.

Ongoing strength in the services sector was only partially offset by falls in both production and construction.

Annual expansion and international standing

On an annual comparison, gross domestic product in July 2026 was 1.6% higher than in the corresponding month of 2025. This annual rate accelerated from the 1.1% year-on-year increase measured in June and surpassed economists' consensus forecast of 1.2%. The 1.6% figure represents the fastest pace of twelve-month economic growth recorded in the United Kingdom since February 2025. Across the first six months of 2026, Britain's gross domestic product expanded by 1.0%, outpacing the growth rates of all other members of the Group of Seven advanced economies. The 1.0% expansion in the first half of 2026 maintained Britain's position ahead of other Group of Seven nations during that period.

Monetary policy forecasts and energy pressures

The growth figures arrive alongside shifting expectations for domestic monetary policy and international energy markets. In July, the Bank of England projected that the British economy would grow by 1.1% over the full year of 2026. Speaking before a parliamentary committee earlier in the week, Bank of England Governor Andrew Bailey commented that economic data had arrived a bit stronger than policymakers had anticipated. The stronger output figures persist despite external pressures generated by the war between the United States and Iran, which pushed global crude oil prices above $105 per barrel. These elevated energy costs have fed into higher household utility bills, elevated government borrowing costs, and projections from the central bank that domestic inflation will climb to approximately 3.2% later in 2026.