The UK economy expanded by 0.7 per cent between July and September, official figures have revealed, as consumer spending remained resilient despite a surge in energy costs triggered by the Iran conflict.
The Office for National Statistics said GDP grew well beyond earlier predictions in the third quarter of 2026, with economists having upgraded their forecasts in recent weeks. During September alone, the UK economy expanded by 0.2 per cent, against expectations of flat growth.
Services sector leads growth
Fresh data demonstrated that the services sector grew 0.9 per cent over the three-month period, while production increased by 0.1 per cent and construction declined by 0.7 per cent.
"The economy grew robustly in the third quarter almost entirely due to strong and widespread growth in the services sector," said Grant Fitzner, chief economist at the ONS, as reported by City AM. "Within services, computer programming again increased strongly, as it has all year, registering its fastest growth in the last three years. We continue to see evidence that AI-linked businesses helped to boost this sector."
AI investment fuels growth
The latest figures reflect relative resilience in the UK economy this year despite repeated warnings that elevated international oil and gas prices would suppress activity.
The Bank of England signalled last week that approximately a fifth of growth was fuelled by AI-related investment. Separate analysis by Bloomberg Economics indicated that around a fifth of the rise in GDP was attributable to AI.
Growth decelerates through the year
However, figures have revealed that growth is steadily decelerating throughout the calendar year. During the first three months of the year, growth stood at 0.6 per cent, before dropping to 0.5 per cent in the second quarter.
The figures indicate that growth this year is set to substantially exceed predictions made by economists last year, who had forecast an increase in GDP of potentially below one per cent.
Lord Jim O'Neill, the former Goldman Sachs executive and close ally to Andy Burnham, recently said annualised growth was nearer to two per cent and implied markets might be mistaken in their assumptions about the UK economy.
Outlook for 2027
Analysts projecting ahead to next year have outlined markedly different estimates for growth in 2027. The Office for Budget Responsibility indicated that the impact of the energy price surge stemming from Middle Eastern conflicts would materialise next year, pulling growth down to one per cent. On Wednesday, the National Institute of Economic and Social Research forecast that growth next year would rise by 1.1 per cent.
