UK growth beats forecasts as services expand

The UK economy expanded by 0.7 per cent between July and September, exceeding forecasts as consumer spending remained resilient despite rising energy costs linked to the Iran conflict. Office for National Statistics figures showed growth of 0.2 per cent in September, against expectations of no change.

Services drove the expansion, growing 0.9 per cent over the quarter. Production increased by 0.1 per cent, while construction declined by 0.7 per cent. ONS chief economist Grant Fitzner highlighted strong computer programming activity and evidence that AI-linked businesses supported the sector. The Bank of England indicated that approximately a fifth of growth came from AI-related investment, with separate Bloomberg Economics analysis reaching a similar assessment.

The outlook remains clouded by elevated international oil and gas prices. For 2027, the Office for Budget Responsibility expects the effects of the energy price surge stemming from Middle Eastern conflicts to pull growth down to one per cent. The National Institute of Economic and Social Research forecast growth of 1.1 per cent next year.