UK economy has expanded by 0.7% between July and September 2026, recording its strongest quarterly growth since early 2024.
The latest figures, published by the Office for National Statistics (ONS), represent an improvement on the 0.5% growth recorded in the second quarter of the year and place the economy 1.9% above its level during the corresponding period in 2025.
The expansion is largely driven by services, which grew by 0.9% during the quarter. Production recorded a more modest increase of 0.1%, while construction contracted by 0.7%.
Real gross domestic product (GDP) per head also increased by 0.7% over the quarter and is 1.7% higher than a year earlier.
Prime Minister Andy Burnham welcomed the performance as “welcome news.”
“Despite a year where events around the world have pushed up costs here at home, our economy is growing, bringing hope for the future.”
Andy Burnham
He added that the job now is “to keep focused on what matters to people,” including “bringing down bills, creating good jobs, helping high streets thrive, and backing businesses to grow.”
“There is more to do, but we have a clear direction. Giving people breathing space now while making the long-term changes needed to deliver good growth in every part of Britain.”
Andy Burnham
Services and Businesses Drive Expansion
The services sector accounted for the largest share of UK’s economic growth during the third quarter, with gains across business-facing activities, information and communication, and professional services.
According to the ONS, information and communication services expanded by 2.1%, largely supported by a 4.4% increase in computer programming, consultancy and related activities.
The industry has been the largest contributor to GDP growth in 2026.
The statistics agency also identified evidence that businesses reporting some of the strongest increases in turnover were involved in artificial intelligence (AI) and cloud computing activities. However, it cautioned that the precise contribution of these technologies to business turnover remains difficult to quantify using its existing data collection methods.
Other business-related activities also recorded notable improvements. Administrative and support service activities grew by 4.1%, driven partly by increased rental and leasing activities, while professional, scientific and technical services expanded by 1.6 percent.
The performance is relatively broad within the services sector, with 11 of its 14 subsectors recording positive growth. Business-facing services increased by 1.0%, compared with 0.5 percent growth in consumer-facing services, indicating that demand from businesses remained a particularly important source of economic activity.
Household spending and investment also contributed to the expansion. Real household consumption increased by 0.6%, while gross fixed capital formation, which measures investment in fixed assets, grew by 1.7%.
Business investment recorded a more moderate increase of 0.4% during the period.
Weak Construction Output Reveals Uneven Growth
Despite the strong performance of services, the latest figures reveal continuing weaknesses in other parts of the economy, particularly construction, where output declined for the third quarter of 2026.
Construction activity fell by 0.7% between July and September and was 1.7% lower than during the same period a year earlier. The decline was primarily associated with a 1.6% contraction in new work, including a 4.7% fall in private housing construction.
Although repair and maintenance activities increased by 0.5%, the improvement was insufficient to offset the wider decline in construction output.
The production sector also recorded only limited growth, expanding by 0.1% after contracting by 0.1% in the previous quarter. Manufacturing provided the main support, increasing by 0.9%, with the manufacture of computer, electronic and optical products rising by 4.6%.
However, production remained constrained by declines in mining and quarrying, electricity and gas supply, and water supply and waste management activities, which fell by 2.2%, 2.1% and 1.5% respectively.
The monthly figures also point to a gradual rather than uninterrupted improvement in economic activity. GDP increased by 0.2% in September, following no growth in August, which was revised down from an earlier estimate of 0.1%. July recorded growth of 0.4%.
Inflation and Borrowing Costs Cloud Economic Outlook
While the third-quarter performance provides a stronger picture of UK’s economic position, the outlook remains exposed to rising energy costs, inflationary pressures and tighter financial conditions.
The Bank of England, in its November Monetary Policy Report, indicated that higher inflation, tighter financial conditions and ongoing fiscal consolidation are expected to weigh on growth in the coming quarters.
The central bank projects UK GDP growth of 1.6% for 2026, before slowing to 1.3% in 2027.
It also anticipates that higher energy prices will constrain household purchasing power, with real household incomes expected to decline during the second half of the year.
However, inflation remains a significant concern. UK consumer price inflation reached 3.5% in September, prompting the Bank’s Monetary Policy Committee to increase the base interest rate by 0.25 percentage points to 4 percent on November 4, in an eight-to-one vote.
The Bank expects inflation to rise to approximately 5% by the middle of 2027, largely reflecting the continued impact of higher global energy prices on household bills and business operating costs.
Chancellor John Healey, however, maintained that “the Middle East conflict has hit growth worldwide, yet Britain is showing standout resilience.”
“Our UK economy is growing at the fastest rate in almost 10 years, outside the pandemic. We are backing UK investment, innovation and fast growth firms. I want to bring back confidence in Britain. Breathing space now and fresh hope for the future.”
John Healey
Against this backdrop, the latest GDP figures offer a positive indication of the economy’s ability to withstand external pressures, although the concentration of growth in services and technology-related activities, alongside persistent weaknesses in construction and rising living costs, suggests that sustaining the momentum will remain a significant challenge.
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