UK economy sees surprise growth in July helped by AI boom

Rob Arnold, co-founder of Ascendea, an AI firm which employs nine people, believes the UK hasn’t seen the real economic growth potential from the technology yet.

He says his company is able to develop apps for other businesses “100 times quicker at a 50th of the cost” because of AI, but that the UK government needs to do more to invest in the sector as there are currently better opportunities in the US.

He knows a few small UK-based AI firms that have either moved to the US or are thinking of doing so due to a lack of UK government support.

Alongside grants and funding, he says the government also needs to invest in training companies on how to use AI as it can be dangerous if not understood properly. “It’s like playing with a weapon,” he says.

Paul Dales, the chief UK economist at Capital Economics, said July’s data showed “the resilience of the economy in the first half of the year continued into the second half”.

However, he added that higher energy prices and borrowing costs would soon start to hit growth, especially if the rises seen this week are sustained.

The Iran war has led to a sharp jump in oil prices, which has fed through to higher energy and fuel prices – affecting households and businesses.

This rise in energy costs has led to fears that inflation will remain high, and increase the chance that central banks will hike interest rates to keep price rises under control.

The Bank of England is meeting next week to discuss interest rates. Economists widely expect rates to be held, but some have predicted an increase before the end of the year.

Chancellor John Healey said the economy, was “demonstrating a welcome resilience, despite serious global uncertainty”.

“Our growth although still fragile was the fastest in the G7 in the first half of the year,” he added.

“But, the conflict in the Middle East does have impacts here at home – from the cost of the weekly family shop to the cost of government borrowing.”

Healey is to present his first Budget in October. He told BBC News this week that he wants people to confident about the economy, despite acknowledging the challenge of “historic high” borrowing costs.

Shadow chancellor Andrew Griffith said nobody in the government “should be high-fiving themselves” over the latest figures.

“Our construction and production sectors are shrinking, unemployment is up under Labour, and we’ve got the highest government borrowing rates in almost 30 years.”