UK Economy Grows 0.7% in Third Quarter, Its Fastest Pace Since Early 2024, as AI-Linked Services Lead

The U.K. economy grew 0.7% in the third quarter of 2026, its fastest quarterly expansion since the first three months of 2024, as strong output in services, led by computer programming and other technology activities, outweighed a drop in construction. The Office for National Statistics published the first estimate for July through September on Thursday, Nov. 12, 2026, and the result matched the 0.7% forecast of economists polled by Reuters, CNBC reported.

Growth picked up from 0.5% in the second quarter and 0.6% in the first. Compared with the same quarter a year earlier, gross domestic product was 1.9% higher, according to the ONS bulletin. Real GDP per head also rose 0.7% in the quarter and was up 1.7% on the year.

Services carry the quarter

The services sector expanded 0.9% in the quarter, while production edged up 0.1% and construction contracted 0.7%. The ONS said output rose in 13 of the 20 subsectors it tracks. Within services, the information and communication industry grew 2.1%, driven mainly by computer programming, consultancy and related work.

The statistics agency said that industry has been the largest contributor to GDP growth across 2026 and that many of the businesses reporting the biggest increases in turnover are involved in artificial intelligence and cloud computing. It added that, because of how its data are collected, it cannot precisely measure how much of the increase stems from those activities. ONS chief economist Grant Fitzner said the expansion was "almost entirely due to strong and widespread growth in the services sector," the BBC reported.

Construction, which makes up about 6% of economic activity, was the main drag. Work on new projects has fallen more than 7% since mid-2025, and private housebuilding is down 30% from its 2022 peak, The Guardian reported.

Monthly figures and revisions

Separate monthly data released the same day showed GDP grew 0.2% in September, beating forecasts for no change. August was revised down to zero growth from an initially reported 0.1%, while July's 0.4% gain was unrevised. Nominal GDP rose 1.4% in the quarter and was 4.3% higher than a year earlier, the ONS said. The agency noted that first estimates are subject to revision and that, since 2000, the average revision between the first and final readings has been an upward 0.08 percentage point. The next GDP release is scheduled for Dec. 22.

Government and economists respond

Chancellor of the Exchequer John Healey said Britain was showing "stand-out resilience" despite the U.S.-Iran war weighing on global growth and that the economy was growing at its fastest rate in almost a decade outside the pandemic period. Prime Minister Andy Burnham said the figures were "bringing hope for the future."

Sanjay Raja, chief U.K. economist at Deutsche Bank, said GDP was up 1.8% so far this year and running at an annualized pace just above 2.5%, the strongest first three quarters since the pandemic rebound, according to The Guardian. He said the U.K. had narrowly lost its position as the fastest-growing G7 economy this year to the United States. The Office for Budget Responsibility forecast 1.2% growth for 2026 at the time of the late-October budget, a projection the Guardian said already looks out of date.

Suren Thiru, chief economist at the Institute of Chartered Accountants in England and Wales, described a "strikingly strong third quarter" in which AI acted as "an extra engine of growth," with companies increasing investment in infrastructure, tech hardware and software. James Smith, an economist at ING, said the IT gains were "very clearly a datacentre story," while noting that output in that area fell in August and September.

Implications for the Bank of England

The data arrive a week after the Bank of England raised interest rates by a quarter percentage point to 4%, its first increase in three years. U.K. annual inflation rose to 3.5% in September, and the central bank has warned it could climb to around 5% by mid-2027. Fuel costs have been a major factor, with petrol above £1.70 a litre and diesel approaching £2, and the ONS said wholesale electricity prices are about double their level of a year ago.

Thiru said the figures keep a December rate increase "firmly on the table." The National Institute of Economic and Social Research urged further increases, with economist Fergus Jimenez-England saying higher rates are needed to keep inflation contained. Markets were pricing a 73% chance of a hike at the Bank's December meeting, according to LSEG data cited by CNBC.

Some analysts questioned whether the pace can last. Simon Pittaway of the Resolution Foundation said the economy's resilience "will be severely tested" by rising inflation and borrowing costs, and Scott Gardner of J.P. Morgan Personal Investing said nervousness around the budget and continued uncertainty over the Middle East are expected to weigh on coming GDP readings. The Bank of England's November Monetary Policy Report projected that growth will slow in the final quarter of 2026 and into 2027.

Market reaction was limited. The pound was down 0.2% against the U.S. dollar and flat against the euro on Thursday morning, and U.K. government bond yields were little changed, CNBC reported.