LONDON, Sept 11 (Reuters) - Britain's economy grew by a much stronger than expected 0.4% in July, extending the strong performance seen in the first half of the year despite headwinds from the U.S.-Iran war, figures from the Office for National Statistics showed on Friday.
Economists polled by Reuters had a median forecasts for the level gross domestic product in July to be unchanged from June after growth of 0.4% in June.
Compared with a year earlier, output in July was 1.6% higher, the fastest annual rate since February 2025 and above economists' 1.2% forecast.
Growth in the three months to July held at the 0.4% recorded in the three months to June, compared with economists' median forecast for a slowdown to 0.3%.
"Ongoing strength in the services sector was only partially offset by falls in both production and construction," ONS Director of Economic Statistics Liz McKeown said, adding that artificial intelligence seemed to be lifting software development.
In the first half of 2026, Britain's economy expanded by 1%, the fastest growth across the Group of Seven large advanced economies – although some analysts believe this may in part reflect seasonal effects that have not been fully adjusted for.
In July, the Bank of England forecast the economy would expand 1.1% over 2026 as a whole, and earlier this week Governor Andrew Bailey told a parliament committee that economic data since then had come in "a bit stronger" than he had expected.
Britain, like other European economies, has taken less of an immediate hit to growth from the U.S.-Iran war than economists had feared at the outset.
But the conflict this week pushed oil prices above $105 a barrel with knock-on impacts on government borrowing costs, and the BoE expects inflation to rise to around 3.2% later this year.
(Reporting by David Milliken; editing by William James)