The UK economy grew faster than expected in the third quarter, expanding by 0.7% in the three months to September, thanks in large part to AI, according to preliminary figures from the Office for National Statistics (ONS).

The stronger-than-forecast performance was the ninth consecutive rolling three-month period of growth and represented an acceleration from the revised 0.6% expansion recorded in the three months to August.

On a monthly basis, GDP increased by 0.2% in September after flat growth in August.

The services sector continued to power the economy, growing 0.9% over the quarter, while production output inched up 0.1%. Construction was the only major drag on growth, contracting 0.7%.

Compared with a year earlier, the economy was 1.9% larger in the three months to September, while September GDP was 2.1% higher than the same month in 2025.

The ONS highlighted the growing contribution of AI-related industries, with computer programming and consultancy making the largest positive contribution to growth during the quarter. Manufacturing of computer, electronic and optical products also expanded by 4.6%.

Despite the upbeat headline figures, economists warned that challenges remain. Rising employment costs, elevated energy prices and ongoing cost-of-living pressures continue to dampen business confidence and consumer demand.

The figures also come as the Bank of England (BoE) grapples with a deteriorating inflation outlook, having warned that inflation could reach 5% in 2027. While the economy has shown surprising resilience, higher energy costs and borrowing rates are expected to remain a significant headwind in the months ahead.

Stuart Morrison, research manager at the British Chambers of Commerce, said: “Today’s preliminary data showing growth of 0.7% in Q3 confirms a resilient economy weathering some of the impact of global shocks.”

“It’s encouraging that the UK outpaced Germany, France and Italy, trailing only the US among G7 economies reporting Q3 data so far. It is the first time UK GDP has grown by at least 0.5% for three consecutive quarters since the post-pandemic recovery in 2021–22.

“With some of the resilience built on the momentum of AI, it’s crucial that government and business work together to help every firm seize the technology moment.

“But dig below the headline and there are signs of an emerging two-speed economy.
“Investment by a few larger firms and sectors is driving growth. For the vast majority of SMEs, investment is flat.

“Our latest survey shows just 17% of firms expect to increase invest in the coming months, unchanged on the quarter and a post-pandemic low.

Anna Leach, chief economist at the Institute of Directors, said: “GDP grew by 0.7% in the third quarter, extending the UK’s better-than-expected run this year. The economy has grown by 1.4% so far in 2026 – almost double rates that were forecast in April.”

"That reflects three things: energy prices not having risen as sharply as feared, stronger growth in some sectors connected with AI, and business adaptability. The question is what happens next."

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