UK GDP expands 0.7% in Q3 2026, boosted by AI investment
Britain's economy grew 0.7% in the July-September quarter, the fastest quarterly expansion since early 2024, driven by AI-related spending and stronger-than-expected output.
Britain's gross domestic product rose 0.7% in the July-to-September quarter, the strongest quarterly gain since the first quarter of 2024, according to the Office for National Statistics. The annualised growth rate accelerated to 1.9%, the highest reading since the fourth quarter of 2024, and on a rolling three-month basis it was the fastest since May.
Economists surveyed by Reuters had expected a 0.5% rise for the quarter, but output also increased 0.2% in September, contrary to forecasts for flat activity. >"Something is stirring: monthly GDP beat consensus for the fifth straight month and the seventh in eight," said Rob Wood, chief UK economist at Pantheon Macroeconomics, adding that the data increased the likelihood of another Bank of England rate hike next month.
The ONS highlighted "widespread strength in industries which may be related to artificial intelligence," noting that computer programming, consultancy and related services made the largest single contribution to growth, while computer manufacturing drove a 4.6% rise in industrial production.
The Bank of England recently raised its 2026 growth projection to 1.6%, above the 1.2% forecast from the Office for Budget Responsibility. The central bank attributed part of the resilience to AI spending and a temporary boost from the fiscal plan announced in the October budget.
"While the UK economy has been relatively resilient since the conflict started, that strength will be tested in the months ahead," said Scott Gardner, investment strategist at J.P. Morgan Personal Investing.
Consumer and business demand have shown signs of weakening, with retail sales volumes falling in September and consumer confidence posting its sharpest monthly decline since April 2020. The government has offered limited support to offset the impact of the energy price shock, though household gas and electricity bills are expected to rise by about 25% when the energy price cap is adjusted in January.
Pantheon’s Wood added that, given the current strength in growth and inflation, a further monetary policy committee hike in December appears more likely.
Business investment grew 0.4% on the quarter, half of the level economists expected in the Reuters poll, marking the weakest expansion since the start of the year.