Britain’s economy grew 0.7% in the third quarter, in line with expectations. Computer programming and consultancy helped drive growth as demand for AI and cloud computing rose, while the Iran war pushed up energy costs.
The UK economy grew 0.7% in the July–September period, up from a revised 0.5% in the second quarter, the Office for National Statistics (ONS) said on Thursday.
ADVERTISEMENT
ADVERTISEMENT
GDP was 1.9% higher than a year earlier. It grew 0.2% in September after flatlining in August.
Services output rose 0.9% and was the main driver of growth. Computer programming, consultancy and related activities grew 4.4%, helping lift output in the wider information and communication sector by 2.1%.
The ONS said computer programming, consultancy and related activities had been “the largest driver of GDP growth across 2026, with evidence that many of the businesses reporting the largest increases in turnover are involved in activities related to artificial intelligence and cloud computing." However, ONS said it was difficult to measure their exact impact.
Sarah Coles, head of personal finance at AJ Bell, said: “Given the global backdrop, the rising cost of living, and the fact we were heading for the uncertainty of the Budget, growth held up well in the third quarter. And AI continued to do a significant portion of the heavy lifting.”
While investors worry that heavy spending on AI may fail to generate lasting profits, Coles said its gradual adoption already appears to be helping businesses in areas such as administrative and support services in the UK.
Production output edged up 0.1%, while construction output fell 0.7%. Manufacturing grew 0.9% in the three months to September, led by a 4.6% rise in output of computer, electronic and optical products.
Coles linked the strength of those manufacturers to AI demand. “It’s another area where growth is underpinned by demand for AI,” she said.
The UK is the world’s fifth-largest economy by nominal GDP, behind the US, China, Germany and Japan.
“The Middle East conflict has hit growth worldwide, yet Britain is showing stand-out resilience,” UK Chancellor John Healey said in response to Thursday’s figures.
The Bank of England last week raised its annual UK growth forecasts to 1.6% for 2026 and 1.3% for 2027, up from 1.1% for both years in July. The Bank said AI-related spending had helped drive business investment.
The central bank also raised its benchmark interest rate by a quarter of a percentage point to 4%, its first increase since August 2023. UK inflation reached 3.5% in September, partly because of higher household energy bills and motor fuel prices.
Kit Rees, an investment strategist at Quilter, said growth remained “robust, if unspectacular by historic standards”. He said higher employment costs, rising energy prices and pressure on household budgets were likely to weigh on the economy into 2027.
