UK economy grows at fastest quarterly rate in more than two years

The UK economy has grown at its fastest quarterly rate since the start of 2024 following a boost from tech services and AI.

The Office for National Statistics (ONS) said gross domestic product (GDP) increased by 0.7% in the third quarter, between July and September, up from 0.5% growth in the second quarter.

This was the strongest growth for a calendar quarter since the first three months of 2024.

The ONS said it was “almost entirely” fuelled by strength in the UK’s services sector, particularly computer programming, which grew at the fastest rate in three years.

It also pointed to evidence that businesses linked to AI adoption were boosting the sector.

Prime Minister Andy Burnham said the figures were “welcome news”, adding: “Despite a year where events around the world have pushed up costs here at home, our economy is growing, bringing hope for the future.”

Chancellor John Healey said: “The Middle East conflict has hit growth worldwide, yet Britain is showing standout resilience.”

Nearly 100 firms working on AI tools to help boost productivity have been awarded Government funding to boost their projects (Alamy/PA)

The latest figures showed GDP for the services industry – which spans sectors from hospitality and leisure to professional and financial services, real estate and healthcare – jumped by 0.9% in the third quarter.

It was given a lift by computer programming and consultancy surging by 4.4%, making it the largest driver of GDP growth across 2026.

The ONS said it found that many of the businesses reporting the largest increases in turnover are involved in activities related to AI and cloud computing.

This reflects a wider AI spending boom as many businesses prioritise investing in their tech systems over other areas.

Chancellor John Healey said Britain is showing ‘standout resilience’ (PA)

PA Wire

Meanwhile, manufacturing activity helped drive growth for the production sector, particularly of computers and electronic items.

On the other hand, the construction sector extended its slump with GDP falling by 0.7% for the third quarter.

Mr Burnham added: “Our job now is to keep focused on what matters to people: bringing down bills, creating good jobs, helping high streets thrive and backing businesses to grow.

“There is more to do, but we have a clear direction. Giving people breathing space now while making the long-term changes needed to deliver good growth in every part of Britain.”