UK economy grows 0.7% led by tech services as energy shock lifts rates

Analysis. The UK economy grew 0.7% between July and September 2026, up from 0.5% in the second quarter, the Office for National Statistics (ONS) said on 12 November. Output was 1.9% higher than a year earlier.

The figure arrives at an awkward moment for households and policymakers. An energy price shock linked to the conflict in the Middle East is pushing inflation up, and the Bank of England raised Bank Rate to 4% the week before the release. The Bank said stronger-than-expected activity added to its case for tighter policy, although its main reason was inflation pressure building in the pipeline.

Where the 0.7% came from

Services rose 0.9%, "in particular business-facing services", according to the ONS. Production edged up 0.1% and construction fell 0.7%. Real GDP per head, which adjusts for population growth, also rose 0.7% in the quarter and was 1.7% higher than a year earlier.

The fastest-growing industry was computer programming, consultancy and related activities, up 4.4% in the quarter, according to ONS statements quoted by Trustnet. The ONS said this industry "has been the largest driver of GDP growth across 2026", a label that covers the whole year, not only the third quarter. It also said "it is difficult for us to quantify the exact impact" of activities such as AI and cloud services on firms' turnover. Manufacture of computer, electronic and optical products rose 4.6%.

The tech gains were not the only source of growth. Trustnet reported that "the wider economy also expanded", and the ONS headline attributes the quarter's rise to services as a whole.

How commentators read the AI effect

Some analysts quoted by Trustnet tied more of the growth to artificial intelligence. Sarah Coles of AJ Bell pointed to a 4.1% third-quarter rise in areas she said were "benefitting from the increasing adoption of AI". George Brown of Schroders said business investment was doing "the heavy lifting amid the AI build-out".

Those are interpretations, not official measurements. The ONS figures relayed by Trustnet show gross fixed capital formation (total investment by businesses, government and households) up 1.7% in the quarter. A breakdown of business investment alone was not available in the material reviewed for this article.

Month by month, and household spending

The ONS monthly figures show growth of 0.4% in July, no growth in August (revised down from 0.1%) and 0.2% in September. Readings differ on what that pattern means. Felix Feather of Aberdeen, quoted by Trustnet, said September showed the economy entered the autumn "with a little more momentum than expected", but added: "we doubt this pace will last."

On the spending side, household consumption rose 0.6%, according to ONS data relayed by Trustnet. The Bank of England's November Monetary Policy Report flags a risk here. In a weaker-demand scenario it notes that "there are limits to how much households can maintain spending by cutting saving".

Why the Bank of England raised rates

At a meeting ending on 4 November, the Monetary Policy Committee voted 8-1 to raise Bank Rate by 0.25 percentage points to 4%. The decision was announced on 5 November. One member voted for a half-point rise to 4.25%.

The Bank said the Middle East conflict "is now in its ninth month" and that global energy prices have kept rising from an already high level. Consumer price inflation was 3.5% in September and is projected to reach around 5% in the second quarter of 2027 before falling back.

The Bank's stated reasoning runs in a clear order. It found "limited evidence" so far of energy costs spreading into other prices and wages, but judged that inflationary pressure in the pipeline was "sufficient to warrant an increase". Activity data stronger than expected then added "to the case for modestly tighter monetary policy". In July, the Bank said, it had expected weak activity to limit firms' pricing power and workers' ability to win higher pay. Since then activity has been more resilient and the labour market has shown signs of stabilising, which the Bank said raises the risk that energy costs feed into broader inflation.

The Bank said policy is "not on a pre-set path" and that it will watch underlying pay, pricing behaviour and slack (spare capacity in the economy). Its next decision is due on 17 December.

What the numbers imply for 2026

NewsWLD's own calculation from rounded ONS quarterly figures suggests calendar-year growth in 2026 of about 1.4% if the fourth quarter is flat, and about 1.5% if it grows 0.2% to 0.3%. This is our arithmetic, not an official forecast.

The Budget, delivered on 28 October by Chancellor John Healey according to Euronews, came two weeks before the GDP release. NewsWLD has not been able to verify the growth forecasts published alongside it, so we do not compare them with the new data here.

Nominal GDP, which is not adjusted for inflation, rose 1.4% in the quarter and was 4.3% higher than a year earlier, the ONS said. Faster nominal growth generally supports tax receipts, but no official body has published an updated fiscal estimate based on these figures.

How reliable the first estimate is

This is a first estimate and will change. Since the start of 2000, the ONS says, the average revision between the first estimate and the final figure published three years later has been +0.08 percentage points. The average size of revisions, ignoring direction, has been 0.27 percentage points. On that record a 0.7% reading could plausibly end up anywhere from about 0.4% to 1.0%. The ONS lists the next release in this series for 22 December 2026.