Britain's economy grew at the fastest rate in two-and-a-half years in the third quarter of 2026, helped by investment in artificial intelligence, extending a strong first half and defying predictions of a slowdown, the Office for National Statistics said on Thursday.
Gross domestic product grew 0.7% in the July-to-September period, up from 0.5% in the second quarter and the strongest calendar-quarter expansion since the first quarter of 2024. The annual growth rate picked up to 1.9%, the strongest reading since the fourth quarter of 2024.
In September alone, output climbed 0.2%, beating expectations for no change. "Something is stirring: monthly GDP beat consensus for the fifth straight month and the seventh in eight," said Rob Wood, chief UK economist at Pantheon Macroeconomics, adding that the data strengthened the chances of another Bank of England rate rise next month.
The ONS said there was "widespread strength in industries which may be related to artificial intelligence". Computer programming, consultancy and related activity made the largest single contribution to growth in the quarter, while computer manufacturing made the biggest contribution to industrial production, up 4.6% in the three months to September.
British growth was the second-fastest in the Group of Seven advanced economies in the quarter, just behind the United States. So far this year, growth has been the strongest since 2017, excluding the post-pandemic rebound.
Not all of the data was strong. Business investment grew just 0.4% on the quarter, half of what economists expected and the weakest growth since the start of the year. Retail sales volumes fell in September, and consumer confidence suffered its sharpest monthly fall since April 2020.
The figures are likely to increase pressure on the Bank of England to raise interest rates again. The central bank warned last week that inflation will near 5% in 2027, and investors see a 73% chance of a back-to-back rate rise in December. The Bank now expects GDP to expand 1.6% this year, much stronger than the 1.2% forecast by the government's Office for Budget Responsibility.
Prime Minister Andy Burnham and finance minister John Healey welcomed the data. But economists warned the strength will be tested in the months ahead, as higher energy prices and borrowing costs weigh on activity and confidence.
