AI-boosted UK economy beats forecasts, giving Healey pre-budget lift

Britain's economy outperformed forecasts in August, with a 0.1% increase in gross domestic product, surpassing the consensus forecast of a 0.1% decline as reported by the Office for National Statistics (ONS). The annual growth rate reached 2.1%, the highest since October 2022. Computer programming emerged as the leading contributor to this growth, suggesting the artificial intelligence boom is bolstering the UK's economy. Consumer spending also exceeded expectations despite inflationary pressures.

Andrew Wishart, a senior economist at Berenberg Bank, attributed much of the upswing to the AI sector, while RSM UK's chief economist, Thomas Pugh, acknowledged broad-based growth across the services sector, which dominates Britain's economy. Despite long-term government borrowing costs hitting their highest since the 1990s, Healey, the finance minister, faces a challenging path to meet his fiscal rules without upsetting investors.

The improved economic data could influence Bank of England policymakers as they consider a rate hike next month, as the third-quarter growth is expected to exceed the central bank's forecast of 0.4%. Britain was jointly the fastest-growing economy among the Group of Seven nations in the first half of 2026, alongside the US.

Healey welcomed the figures, emphasizing the nation's resilience in the face of global shocks, such as conflicts in the Middle East and Europe. For August alone, manufacturing showed a 1.2% month-on-month surge, while the services sector remained flat on the month, despite a 1.1% growth in computer programming. Business investment, particularly in tech hardware, has been a significant driver of Britain's strong growth performance.