The UK economy expanded by 0.7% in the third quarter of 2026, driven by services sector growth linked to AI activity, according to official figures.
The UK economy grew 0.7% in the third quarter of 2026, in line with estimates, according to figures from the Office for National Statistics. The growth rate was an improvement from the previous quarter, when gross domestic product grew by 0.5%. In the first quarter, the economy grew by 0.6%. The economy grew 1.9% year-on-year in the three months to September.
The services sector expanded by 0.9%, offsetting 0.1% output growth in the production sector and a 0.7% contraction in construction. Within services, information and communication was a key driver, expanding by 2.1% in the quarter. The ONS said this industry has been the largest driver of GDP growth across 2026, with evidence that many businesses reporting the largest increases in turnover are involved in activities related to artificial intelligence and cloud computing. The ONS added that it is difficult to quantify the exact impact of these activities on turnover.
U.K. finance minister John Healey said the country was showing "stand-out resilience" despite the U.S.-Iran war hitting growth worldwide. He said: "Our U.K. economy is growing at the fastest rate in almost ten years, outside the pandemic." Prime Minister Andy Burnham said the third-quarter growth was "bringing hope for the future."
Suren Thiru, chief economist at the Institute of Chartered Accountants in England and Wales, said AI "fired up as an extra engine of growth in the quarter." He added that the figures help keep a December interest rate rise firmly on the table.
The Bank of England raised interest rates last week for the first time in three years. Markets are pricing in a 73% chance of a rate hike at its final meeting of the year in December, according to LSEG data. The Bank of England recently increased its 2026 economic growth forecast to 1.6%, compared with the 1.2% projection published by the Office for Budget Responsibility following the government's October budget.
The data shows continued economic expansion despite elevated borrowing costs and volatile energy prices, though analysts warn that nervousness ahead of the Autumn Budget and uncertainty from the Middle East war could weigh on confidence and activity in coming GDP readings.
Sources
This article was drafted with AI assistance and checked against the sources above. Company claims are reported as claims. Cover image is AI-generated.
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