UK GDP Jumps 0.7% as AI Investment Helps Drive Fastest Quarterly Growth in Two and a Half Years

The UK economy grew by 0.7 per cent between July and September 2026, recording its fastest quarterly expansion in two and a half years, according to the Office for National Statistics (ONS). Growth accelerated from 0.5 per cent in the previous quarter, leaving gross domestic product (GDP) 1.9 per cent higher than a year earlier.

The services sector provided the main contribution, expanding by 0.9 per cent. The ONS identified business-facing services, information and communication, and professional and technical activities among the main sources of growth. It also said businesses involved in artificial intelligence (AI) and cloud computing were among those reporting the largest increases in turnover.

The figures show stronger activity across much of the services sector, although construction contracted and production growth remained limited. The ONS said its data collection methods made it difficult to quantify the precise contribution of AI-related activities.

Technology and Business Services Support Growth

Services output increased by 0.9 per cent in the third quarter. Business-facing services rose by 1.0 per cent, while consumer-facing services increased by 0.5 per cent.

Information and communication output grew by 2.1 per cent, driven mainly by a 4.4 per cent rise in computer programming, consultancy and related activities. The ONS said this industry had been the largest driver of GDP growth across 2026. Many businesses recording the strongest turnover increases were involved in AI-related and cloud computing activities, although their exact impact could not be measured.

Administrative and support services expanded by 4.1 per cent, while 11 of the 14 services subsectors contributed positively to growth.

Production output increased by 0.1 per cent, with manufacturing rising by 0.9 per cent. Falls in mining and quarrying, and electricity and gas supply, limited the sector's growth. Construction output fell by 0.7 per cent and was 1.7 per cent lower than a year earlier. Private housing new work declined by 4.7 per cent.

Household Spending and Investment Increase

The ONS said growth in expenditure was mainly supported by household consumption and investment. Household spending increased by 0.6 per cent in the quarter and was 1.8 per cent higher than a year earlier, with transport and housing contributing to the rise.

Gross fixed capital formation, which measures investment in fixed assets, increased by 1.7 per cent. Business investment rose by 0.4 per cent and was 3.0 per cent above its level a year earlier.

Real GDP per head, which divides economic output by the population, increased by 0.7 per cent during the quarter and was 1.7 per cent higher than a year earlier. The ONS describes this as an indicator of welfare, although it does not show how growth is distributed.

Monthly Figures and Revisions

Monthly GDP increased by 0.2 per cent in September, after no growth in August. The August figure was revised down from an earlier estimate of 0.1 per cent growth. Output had increased by 0.4 per cent in July.

The ONS said the quarterly figures were an initial estimate and could change as more survey responses and administrative data became available. Since 2000, first estimates have been revised upwards by an average of 0.08 percentage points. The average absolute revision was 0.27 percentage points.

The next quarterly GDP update is scheduled for 22 December 2026.