The UK economy grew faster than expected in July, with the expansion partly linked to businesses using artificial intelligence (AI).

Gross domestic product rose by 0.4% in July, according to the Office for National Statistics (ONS), ahead of analysts’ forecasts of no growth. Growth was driven largely by the services sector, particularly computer programming, and follows a 0.3% rise in June and no growth in May.

The ONS said IT firms reporting the largest turnover appear to be linked to AI, though the overall contribution remains difficult to quantify; warm weather and the football World Cup were also cited as factors.

Economists were divided on the outlook. Capital Economics said the resilience seen earlier in the year had carried into the second half, though rising energy prices and borrowing costs were expected to weigh on growth soon. KPMG said the headline figure masks a weaker picture for households, with retail and hospitality activity contracting in July amid higher fuel costs and elevated mortgage rates.

The growth figures were published days ahead of the Bank of England’s rate decision, which saw the Bank hold interest rates at 3.75%, and ahead of Chancellor John Healey’s first Budget in October. Healey said UK growth, though still fragile, was the “fastest in the G7 in the first half of the year.”

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