UK economy grows 0.7 per cent as AI boom lifts business investment

The UK economy expanded by 0.7 per cent in the third quarter of 2026, according to official data released by the Office for National Statistics (ONS). This growth was driven primarily by robust performance in the services sector, which increased by 0.9 per cent over a three-month period. Within the services sector, computer programming showed the strongest growth in three years, bolstered by businesses linked to artificial intelligence (AI).

Business investment also rose by 0.4 per cent in the quarter, marking a 3 per cent increase compared to the same period last year. Despite a spike in energy prices due to the conflict in Iran, spending remained strong, contributing to the overall growth. Prime Minister Andy Burnham noted that the positive economic outlook underlined the government's focus on reducing costs, creating jobs, and supporting businesses.

Chancellor John Healey highlighted the economy's "stand-out resilience," with growth outpacing the previous ten years' averages, except during the pandemic. The Bank of England and Bloomberg Economics both indicated that a significant portion of the growth was attributable to AI-related investments, suggesting that the UK economy is performing better than anticipated.

Economic experts, such as former Goldman Sachs executive Lord Jim O’Neill, have projected annualized growth closer to two per cent for 2026, with forecasts for next year varying widely, with the Office for Budget Responsibility estimating a potential slowdown to 1 per cent due to the impact of energy price spikes.