UK business activity returned to growth in July, as warm weather and the World Cup boosted consumer spending, but experts say the improvement is fragile without clearer economic policy and a reduction in geopolitical risk.
Services sector drives rebound
The latest Business Trends report from advisory firm BDO showed the firm's output index rose to 95.29 in July from 93.41 in June, moving past the 95-point threshold that BDO uses to indicate growth rather than contraction.
The rebound was led by the services sector, with hospitality and retail reporting stronger activity as domestic tourism rose during the warm spell and households spent more during World Cup fixtures. BDO said those factors helped lift consumer-facing businesses across the month.
Business confidence remains subdued
Despite the pick-up in activity, BDO cautioned that sentiment across the corporate sector remains weak. The report's business confidence metric inched up to 89.96 in July from 88.45 in June, the latter having represented a five-year low.
Confidence in manufacturing, however, deteriorated in July. Firms in the sector continued to face elevated costs and supply chain uncertainty linked to the ongoing conflict in the Middle East, according to the report.
“There’s nothing quite like a summer of sun and football to give a boost to the economy, but sadly it can’t last forever,” said Scott Knight, head of growth at BDO.
He added that without greater certainty around Government economic policies and a reduction in geopolitical tensions, any improvement was likely to be temporary, seasonal and short‑lived.
- Output index: 95.29 in July (from 93.41 in June)
- Business confidence: rose to 89.96 in July (from 88.45 in June)
- Drivers: warm weather, domestic tourism, World Cup-related spending
- Risks: weak manufacturing confidence, high costs, supply chain disruption, geopolitical tensions
The report also noted an apparent short-term uplift in optimism following the appointment of Andy Burnham as Prime Minister, a so‑called "Burnham bounce", which contributed modestly to sentiment during the month.
| Metric | June | July |
|---|---|---|
| BDO output index | 93.41 | 95.29 |
| Business confidence | 88.45 | 89.96 |
Implications and context
The figures underline how short-term factors — notably weather and major sporting events — can lift spending in hospitality and retail, but they also highlight the uneven nature of the recovery. While consumer-facing services saw gains, manufacturing continued to struggle with cost pressures and international supply chain disruption.
BDO's analysis frames July's rise as a partial and possibly temporary recovery. The firm warned that the UK economy may need clearer fiscal and regulatory direction from government to sustain momentum. That caution is amplified by external risks: ongoing geopolitical tensions have fed into higher costs and shipping uncertainty, which weigh particularly heavily on industry and exporters.
For policymakers, the report presents a dilemma. Short-term boosts to activity will be welcomed as they ease immediate pressures on businesses and households. But sustaining growth typically requires policy clarity that reduces uncertainty for firms making hiring, investment and supply decisions.
For firms, the immediate takeaway is pragmatic. Hospitality and retail businesses may seek to consolidate gains from the summer, while manufacturers will need to manage cost and supply risks that remained evident in the July data.
BDO's findings suggest the recovery remains in precarious balance: seasonal and event-driven tailwinds have produced a welcome uptick, yet broader confidence and structural headwinds imply that any sustained revival will depend on political and geopolitical developments.
