UK economy grows 0.7% as AI demand boosts services

Britain’s economy grew 0.7% in the July-September period, up from a revised 0.5% in the second quarter, according to the Office for National Statistics (ONS). Growth matched expectations, with GDP 1.9% higher than a year earlier. Services output rose 0.9%, making it the main driver of the expansion.

Computer programming, consultancy and related activities grew 4.4%, helping lift the wider information and communication sector by 2.1%. The ONS identified these activities as the largest driver of GDP growth across 2026, with many businesses reporting the strongest turnover increases linked to AI and cloud computing. However, it cautioned that their exact impact was difficult to measure. Manufacturing grew 0.9%, led by a 4.6% increase in computer, electronic and optical products, while construction output fell 0.7%.

The Bank of England raised its growth forecasts to 1.6% for 2026 and 1.3% for 2027, citing AI-related spending as a support for business investment. It also increased its benchmark interest rate to 4%. Inflation reached 3.5% in September, partly reflecting higher household energy bills and motor fuel prices. Rising employment costs, energy prices and pressure on household budgets remained risks to growth as the Iran war pushed up energy costs.