UK Economy Expands by 0.7% as Technology Sector Drives Strongest Growth Since 2024
The UK economy expanded by 0.7% in the third quarter of 2026, marking its fastest quarterly growth rate in two and a half years. Official data released by the Office for National Statistics shows that a surge in artificial intelligence adoption and IT services helped power the expansion, offsetting broader pressures from high global energy prices.
The headline figure for the July-to-September period matched economic forecasts and equaled the 0.7% growth logged in the first quarter of 2024. Monthly GDP grew by 0.2% in September, beating projections of zero growth, though August performance was revised down from 0.1% to flat. Chancellor John Healey welcomed the figures, highlighting the nation’s underlying economic resilience.
Tech Surge Offsets Construction Slump
The overall expansion was overwhelmingly powered by the dominant services sector, which advanced by 0.9% over the quarter. Within services, the information and communication industry expanded by 2.1%, fueled by heavy demand for computer programming, consultancy, and cloud computing. Sarah Coles, head of personal finance at AJ Bell, noted that AI performed “a significant portion of the heavy lifting” during the period.
Sanjay Raja, chief UK economist at Deutsche Bank, pointed out that GDP has gained 1.8% so far this year, pushing an annualized pace slightly above 2.5%. “Compared to its G7 peers, the UK has relinquished its title as the fastest-growing economy this year to the US. But only just,” Raja noted, adding that outside of post-pandemic rebounds, the economy hasn’t run this hot since 2017.
The broader growth figures masked sharp sector divergences. While industrial production edged up 0.1%, construction activity dropped significantly. Although construction accounts for only about 6% of total economic activity, new project work has dropped more than 7% since mid-2025, while private housebuilding sits 30% below its 2022 peak.
Central Bank Rate Pressures Mount
The surprisingly solid output is already outstripping forecasts. The Office for Budget Responsibility projected at the end of October that full-year growth would hit 1.2%, a figure now widely seen as outdated. However, persistent inflation and elevated automotive fuel costs present ongoing risks.
Last week, Bank of England policymakers voted to raise interest rates by a quarter of a percentage point to 4%. Analysts suggest the latest third-quarter strength could encourage central bankers to consider another rate increase when they convene again in December.
Highlighting the ongoing policy challenge, Fergus Jimenez-England of the National Institute of Economic and Social Research warned that “further rate rises are needed to keep inflation contained and protect the economy from a costlier correction later.”