The UK economy grew by 0.7 per cent between July and September, official data has shown, as spending held up in the face of a spike in energy prices caused by the Iran war. 

The Office for National Statistics said GDP expanded far above previous expectations in the third quarter of 2026, with economists revising up forecasts in recent weeks. It is the fastest quarterly growth figure in more than two years and brings the UK back to averages seen around 10 years ago.

Over the month of September, the UK economy grew 0.2 per cent, compared to projections of zero growth. 

New figures showed that the services sector grew 0.9 per cent over a three-month period, while production expanded by 0.1 per cent and construction fell 0.7 per cent.

“The economy grew robustly in the third quarter almost entirely due to strong and widespread growth in the services sector,” said Grant Fitzner, chief economist at the ONS.

“Within services, computer programming again increased strongly, as it has all year, registering its fastest growth in the last three years. We continue to see evidence that AI-linked businesses helped to boost this sector.”

Underlying figures showed that business investment was up by 0.4 per cent in the last quarter and about three per cent higher than the same time last year. Most services sub-sectors grew while household consumption was also higher in the third quarter than in the second three-month period of the year.

In an unusual intervention, Prime Minister Andy Burnham directly commented on the latest figures.

““This is welcome news,” Burnham said. “Despite a year where events around the world have pushed up costs here at home, our economy is growing, bringing hope for the future.

“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.”

In a separate statement, Chancellor John Healey said the UK economy was showing “stand-out resilience” and growing at the “fastest rate in almost ten years, outside the pandemic” after data showed that GDP was about 1.9 per cent higher than the same quarter a year ago.

UK economy benefits from AI investment

The latest set of data reflects relative strength in the UK economy this year despite a series of warnings that higher international oil and gas prices would dampen activity. 

The Bank of England indicated last week that about a fifth of growth was driven by AI-related investment. Independent figures by Bloomberg Economics suggested about a fifth of the expansion in GDP was due to AI. 

In the first three months of the year, growth came in at 0.6 per cent, followed by 0.5 per cent in the second quarter. 

The data suggests that growth this year is expected to far outpace expectations set by economists last year, who had predicted an improvement in GDP of as low as below one per cent. Lord Jim O’Neill, the former Goldman Sachs executive and close ally to Andy Burnham, recently said annualised growth was closer to two per cent and suggested markets could be off the mark in assumptions about the UK economy. 

Forecasters looking ahead to next year have pencilled in dramatically different figures for growth in 2027. 

The Office for Budget Responsibility suggested that the effects of the energy price spike from conflicts in the Middle East would kick in next year, dragging growth down to one per cent. 

On Wednesday, the National Institute of Economic and Social Research said growth next year would edge up by 1.1 per cent.