UK economy grows 0.7%, its fastest pace in two and a half years

What happened. The ONS published its first estimate for July to September 2026: GDP up 0.7% on the quarter and 1.9% on the same quarter a year ago. Reuters says it is the fastest calendar-quarter growth since the first quarter of 2024. In September alone output rose 0.2%, and August was revised down to zero.

What drove it. Almost all of it came from services, especially business-facing services (up 1.0%). Information and communication rose 2.1%, computer programming and consultancy 4.4%. The ONS says this industry has been the biggest driver of growth in 2026, with many of the firms reporting the largest revenue gains linked to AI and cloud computing. Manufacturing rose 0.9%, while construction fell 0.7%, with private housing new work down 4.7%.

Who spent. Household spending rose 0.6%, government spending 0.6%, fixed investment 1.7% and business investment 0.4%. Exports rose 1.6% and imports 1.8%.

Limits. This is a first estimate and it will be revised. Reuters also points to weak spots: retail sales volumes fell in September, and consumer confidence had its sharpest monthly drop since April 2020 before the budget.

Confirmed facts

• UK real GDP grew 0.7% in the third quarter of 2026 after 0.5% in the second quarter.^[1][2]
• GDP was 1.9% higher than in the same quarter of 2025.^[1][2]
• Services grew 0.9%, production 0.1%, and construction fell 0.7%.^[1]
• GDP grew 0.2% in September; August was revised from 0.1% growth to zero.^[1]
• Computer programming, consultancy and related activities grew 4.4%; the ONS sees a contribution from AI and cloud firms.^[1]
• Household spending rose 0.6% and gross fixed capital formation 1.7%.^[1]
• It was the strongest calendar-quarter growth since the first quarter of 2024 and matched a Reuters poll of economists.^[2]
• The Bank of England now expects 1.6% GDP growth in 2026, the Office for Budget Responsibility 1.2%.^[2]
• The next GDP estimate is due on December 22, 2026.^[1]

Implications

• ConfirmedUK growth in 2026 is running faster than in 2025.
• Our readingStrong data lowers the chance of a quick Bank of England rate cut.
• Our readingIf high energy prices and borrowing costs keep biting, growth may slow in the fourth quarter.

Still unknown

• How much the first estimate will be revised in December.
• How the October 28 budget will affect spending in the fourth quarter.
• How much of the growth came from AI-linked firms: the ONS says it is hard to measure exactly.

Who it affects

United Kingdom, Europe. Anyone holding pounds or UK stocks, or watching European interest rates

Sources

1. Office for National Statistics: GDP first quarterly estimate, UK: July to September 2026 November 12, 2026 · official
2. Reuters (via Fresno Bee): UK economy expands by most in 2-1/2 years in Q3 November 12, 2026 · media