Investment in artificial intelligence (AI) helped to drive a surprise boost in the UK economy in July, according to official figures.
Economic growth matters because it affects things like pay increases for workers and the amount of tax the government raises to pay for services.
UK economic growth is measured by the change in the country's GDP, or gross domestic product. This includes all the economic activity of companies, governments, and people in a country.
In the UK, the Office for National Statistics (ONS) publishes new GDP figures every month. However, these can vary quite a lot, and the quarterly figures, which cover three months at a time, are considered more significant.
Most economists, politicians, and businesses like to see GDP rising steadily. That's because it usually means people are spending more, extra jobs are created, more tax is paid, and workers get better pay rises.
When GDP is falling, it means the economy is shrinking. This can be bad news for businesses and workers as it can lead to pay freezes and job losses.
If GDP falls for two quarters in a row, that is known as a recession.
The economy expanded by 0.4% in July, the ONS said, whereas economists had predicted no growth. It follows growth of 0.3% in June and zero growth in May.
Economists said July's surprise growth figure showed the UK economy was proving resilient in the face of shocks, such as the US-Israel war with Iran. The outbreak of the conflict has led to the effective closure of the Strait of Hormuz, a narrow waterway south of Iran through which one fifth of the world's oil and gas usually flows. This closure has led to a sharp jump in oil prices, which has fed through to higher energy and fuel prices.
Economists expect UK growth to slow in the months ahead as those costs continue to affect households and businesses.
In April, the International Monetary Fund (IMF) said it expected the Iran war to hit the UK the hardest of the world's advanced economies. However, the IMF currently forecasts the UK's economy will grow by 1% this year, up from its previous estimate of 0.8%.
The Labour government has repeatedly said growth is its top priority, but has faced criticism for achieving only moderate GDP growth since it took power in 2024. The ONS has estimated UK GDP increased by 1.3% in 2025, up from 1.0% in 2024.
If GDP is going up steadily, people pay more in tax because they're earning and spending more.
