Britain’s economy grew a stronger-than-expected 0.4% in July, with AI- and cloud-linked technology services helping drive the expansion, according to Bloomberg News. It marks the first time AI has been cited as a major driver in official U.K. growth data.
Computer programming, consultancy and information services were major contributors to growth in Britain’s services sector, according to the Office for National Statistics (ONS), which linked the strength to AI and cloud computing. Economists were forecasting no growth in July. Last month, economic growth also far exceeded economists’ consensus.
“There is a booming landscape of AI startups in the U.K., for example, as well as many labs setting up here,” Bouke Klein Teeselink, an AI expert at King’s College London, told Bloomberg News. “There is an increasing number of firms that sell AI embedded services. That’s AI for your customer relationship management, improving your workflows, or drafting legal documents.”
More than one-third of U.K. businesses now use AI, up from 12% in late 2023, although only 10% report extensive use, according to ONS figures cited by Bloomberg. AI adoption is particularly high in information technology and professional, scientific and technical services.
Investment has also been rising. U.K. business investment was nearly 5% higher in the second quarter than two years earlier, while private-sector investment in digital infrastructure has climbed to levels last seen during the dot-com boom, Bloomberg reported.
The data do not establish that AI is making the broader British economy more productive. Companies may be spending on software, infrastructure, training and organizational changes before realizing efficiency gains.
The distinction is important because the International Monetary Fund has estimated that AI could eventually increase U.K. total factor productivity by as much as 0.5% annually over the medium term, “clearly above the average of European countries and on par with estimated U.S. gains.”
The ONS is itself working to improve measurement of AI’s economic contribution, saying the technology is producing “fundamental changes to the nature of work and drivers of GDP.”