UK Economy Grows 0.7% in Third Quarter as AI Demand Lifts Output

The UK economy grew by 0.7% in the third quarter of 2026, official figures showed on Thursday, 12 November, marking the fastest UK GDP growth since the start of 2024 as demand linked to artificial intelligence (AI) lifted output across the services sector.

The Office for National Statistics (ONS) said real gross domestic product (GDP) rose 0.7% between July and September, up from growth of 0.5% in the second quarter. Compared with the same quarter a year earlier, the economy was 1.9% larger.

FAKTA

• UK GDP grew 0.7% in Q3 2026 (July to September), after 0.5% growth in Q2 2026.
• GDP was 1.9% higher than in Q3 2025, the strongest annual rate since late 2024.
• Services output rose 0.9% and drove the expansion; computer programming grew 4.4%.
• GDP increased 0.2% in September 2026 after no growth in August.
• Construction output fell 0.7% in the quarter, the only major sector to shrink.
• The Bank of England now expects the economy to grow 1.6% in 2026.

Services Lead the Recovery

Growth in the third quarter was almost entirely driven by the services sector, which expanded by 0.9%. Within services, computer programming, consultancy and related activities grew by 4.4%, the fastest rate in three years, making it the largest single driver of GDP growth across 2026 so far.

The ONS said many of the businesses reporting the largest increases in turnover were involved in activities related to artificial intelligence and cloud computing. Information and communication output rose 2.1% in the quarter, and the ONS noted widespread strength in industries that may be related to AI, although it said the exact contribution of AI was difficult to measure.

Household consumption grew by 0.6% in the quarter, supported by spending on transport and housing services. Production output edged up 0.1%, while business investment grew by just 0.4%, the weakest quarterly increase since the start of the year.

The City of London financial district. Services, led by computer programming and AI-related work, powered the UK economy’s 0.7% growth in the third quarter of 2026.

Construction Remains the Weak Spot

Construction was the only major sector to contract, with output falling 0.7% in the third quarter. Within construction, private housing new work dropped by 4.7%, underlining the continued strain on the housing market even as the wider economy picked up.

On a monthly basis, GDP grew by 0.2% in September after showing no growth in August, which was revised down from an earlier estimate of 0.1% growth. July growth was unrevised at 0.4%.

UK GDP Growth in 2026

Strongest Quarter Since Early 2024

The 0.7% expansion was the strongest calendar-quarter growth since the first three months of 2024, and the third consecutive quarter of positive growth in 2026. Reuters reported that British growth in the quarter was the second-fastest among the Group of Seven advanced economies, just behind the United States.

The figures also beat expectations. 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 its July forecasts. That is well above the 1.2% forecast for 2026 by the government’s Office for Budget Responsibility after finance minister John Healey’s budget on 28 October, which did not factor in some of the stronger recent GDP data.

Economists nevertheless warned that challenges remain. Rising employment costs, elevated energy prices and continued cost-of-living pressures are still weighing on business confidence and consumer demand, and the Bank of England has warned that inflation could reach 5% in 2027.

Conclusion

The third-quarter figures show a UK economy growing faster than expected, carried by services and by spending on AI and cloud computing. The test in the months ahead will be whether that momentum can broaden beyond technology services into construction, investment and household spending.

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Frequently Asked Questions

What is UK GDP growth in Q3 2026?

UK GDP grew by 0.7% in the third quarter of 2026 (July to September), according to the Office for National Statistics, up from 0.5% in the second quarter.

What drove the UK economy’s growth?

Services led the expansion, growing 0.9%. Computer programming and consultancy grew 4.4%, and the ONS linked much of the strength to businesses involved in artificial intelligence and cloud computing.

How much did the UK economy grow compared with a year earlier?

GDP was 1.9% higher than in the third quarter of 2025, the strongest annual growth rate since the fourth quarter of 2024.

Which part of the economy shrank?

Construction output fell 0.7% in the quarter, and private housing new work dropped 4.7%.