The U.K. economy grew by 0.7% in the third quarter of 2026, matching economists' expectations. The expansion was primarily driven by the services sector, which saw a 0.9% increase in output. This growth offset declines in the production sector, which grew by 0.1%, and the construction sector, which contracted by 0.7%. The information and communication subsector within services was a key contributor, expanding by 2.1% and benefiting from activities related to artificial intelligence and cloud computing.
U.K. finance minister John Healey highlighted the economy's resilience despite global challenges, including the U.S.-Iran war. He noted that the U.K. is growing at the fastest rate in nearly a decade, excluding the pandemic. Prime Minister Andy Burnham also expressed optimism, calling the growth a sign of hope for the future. However, the British pound fell slightly against the U.S. dollar and remained flat against the euro.
Economists cautioned that the economy's strength will face tests in the coming months. Scott Gardner of J.P. Morgan Personal Investing described the results as decent but noted that uncertainty from the Middle East war and the upcoming Autumn Budget could weigh on confidence. Suren Thiru of the Institute of Chartered Accountants in England and Wales emphasized AI's role as an 'extra engine of growth,' driving investment in infrastructure and technology.
The Bank of England raised interest rates for the first time in three years, with markets pricing in a 73% chance of another hike in December. The central bank warned that inflation could rise to around 5% by mid-2027, despite GDP growth being more resilient than expected.