Economists link Britain’s growth surprise to AI spending

Britain’s economy grew 0.1% in August, defying expectations for a 0.1% contraction, according to the Office for National Statistics. Annual growth reached 2.1%, the strongest increase since August 2022, while output over the three months to August rose 0.7%. Computer programming, consultancy and related activities expanded 5% over the three months, becoming the largest contributor to growth for a sixth consecutive month.

Economists at Berenberg, PwC and Capital Economics linked the economy’s resilience partly to AI-related investment. Berenberg’s Andrew Wishart said the industry breakdown pointed to AI driving much of the recent pickup. PwC’s Jake Finney highlighted business spending on technology hardware, while noting that Britain still trails the U.S. in investment scale and economic returns.

The expansion remained uneven. Manufacturing rose 1.2% in August, but services output was flat, construction fell 0.2% and consumer-facing services declined 0.3%. Capital Economics warned that higher inflation could slow growth. Third-quarter growth now appears set to exceed the Bank of England’s 0.4% forecast. Financial Markets Online’s Samuel Fuller said the central bank was widely expected to raise its base rate to 4% in three weeks.