The U.K. economy grew at its fastest pace since early 2024 in the third quarter of 2026, driven by investment in artificial intelligence. Gross domestic product (GDP) expanded by 0.7% in the July-to-September period, up from 0.5% in the previous quarter, according to the Office for National Statistics. The annual growth rate also picked up to 1.9%, the strongest since the fourth quarter of 2024.
Computer programming, consultancy, and related activities made the largest contribution to growth, while computer manufacturing saw a 4.6% increase in the three months to September. The data strengthened expectations for another Bank of England rate hike next month, with economists noting that monthly GDP has beaten consensus for the fifth straight month.
Despite the strong performance, some economists warn of slower growth in the final quarter due to higher energy prices and borrowing costs. The Bank of England upgraded its 2026 growth projection to 1.6%, higher than the government’s forecast of 1.2%. The central bank attributed some of the strength to AI spending and a temporary boost from the recent budget.
However, there are signs of weakening consumer and business demand due to prolonged high energy prices and rising interest rates. Retail sales volumes fell in September, and consumer confidence saw its sharpest decline since April 2020. The government has offered limited support to help families absorb the financial impact of the energy price shock, with household bills set to rise by about 25% in January.