UK Economy Grows 0.7% in Third Quarter of 2026

The United Kingdom economy grew by 0.7% in the third quarter of 2026, marking its fastest expansion in two and a half years and an acceleration from the 0.5% growth seen in the second quarter. This growth was primarily driven by the services sector, which expanded by 0.9%, with significant contributions from computer programming, cloud computing, and artificial intelligence-linked businesses. Investment in infrastructure and defence also helped offset a cost-of-living slowdown and high energy prices resulting from the war in Iran.

John Healey, the Chancellor of the Exchequer, stated the economy is showing standout resilience and growing at the fastest rate in nearly ten years, excluding the pandemic. Prime Minister Andy Burnham noted that the growth is bringing hope for the future. Despite the overall expansion, the recovery remained uneven, as the construction sector contracted by 0.7% and food and beverage services declined.

To combat inflation driven by fuel costs, the Bank of England raised interest rates to 4% and upgraded its 2026 growth projection to 1.6%, surpassing the Office for Budget Responsibility's 1.2% forecast. While consumer spending remained strong, economists from Deutsche Bank warn that growth will likely cool in the final quarter of 2026 as higher interest rates and inflation begin to weigh on the economy.