November 12, 2026 | LONDON, United Kingdom — Britain’s economy expanded by 0.7 per cent in the third quarter of 2026, its strongest quarterly growth since early 2024, as business services, computer programming and other technology-related activity helped offset weakness in construction and parts of consumer-facing services.

The Office for National Statistics (ONS) published the first estimate on Thursday, November 12. The increase from 0.5 per cent growth in the second quarter was in line with economists’ forecasts and lifted annual growth to 1.9 per cent. The figures point to a more resilient economy than some analysts expected, but they also reveal an uneven recovery in which technology and business services are doing more of the work than housing construction and hospitality.

The front façade of the Bank of England building in the City of London.
The Bank of England in the City of London. Photograph: Michael / Wikimedia Commons, CC0 1.0. Image source.

Services And Technology Lead The Expansion

Services output increased by 0.9 per cent during the quarter, making it the main contributor to growth. Business-facing services rose by 1 per cent, while consumer-facing services grew by 0.5 per cent. Information and communication output increased by 2.1 per cent, with computer programming, consultancy and related activities rising by 4.4 per cent.

The ONS said information and communication had been the largest driver of UK GDP growth across 2026. It reported that many businesses recording the strongest increases in turnover were involved in artificial intelligence and cloud computing. The statistics agency also cautioned that its data collection does not allow it to quantify precisely how much of the overall expansion came directly from AI-related activity.

Administrative and support services rose by 4.1 per cent, helped by a 6.6 per cent increase in rental and leasing activity. Professional, scientific and technical services also contributed positively. The pattern suggests that companies supplying digital infrastructure, consultancy, business support and specialist services are helping to sustain output even as some traditional sectors face cost and demand pressures.

The London skyline along the River Thames viewed from Waterloo Bridge.
The City of London skyline viewed along the Thames from Waterloo Bridge. Photograph: David Iliff / Wikimedia Commons, CC BY-SA 3.0. Image source.

Construction And Hospitality Remain Under Pressure

The headline growth figure masks continuing weakness in several parts of the economy. Construction output fell by 0.7 per cent in the third quarter and was 1.7 per cent lower than a year earlier. New construction work declined by 1.6 per cent, with private housing new work down 4.7 per cent. Repair and maintenance rose by 0.5 per cent, but that was not enough to offset the fall in new projects.

Accommodation and food services also contracted by 0.5 per cent, including a 1.9 per cent decline in food and beverage services. Education output fell by 0.5 per cent. The figures point to pressure on businesses that depend heavily on household discretionary spending, while high borrowing costs and construction expenses continue to weigh on housing and property-related activity.

Production output increased by just 0.1 per cent. Manufacturing was the stronger part of the sector, rising by 0.9 per cent, with computer, electronic and optical products recording a 4.6 per cent increase. However, mining and quarrying, electricity and gas supply, and water-related industries all recorded declines over the quarter.

The Palace of Westminster and Elizabeth Tower in London.
The Palace of Westminster in London. Photograph: Chelsea Rogers91 / Wikimedia Commons, CC BY-SA 3.0. Image source.

Household Spending And Investment Improve

The expenditure figures showed that household consumption increased by 0.6 per cent in the third quarter, while gross fixed capital formation rose by 1.7 per cent. Business investment grew by 0.4 per cent and was 3 per cent higher than a year earlier. Exports increased by 1.6 per cent, while imports rose by 1.8 per cent.

Real GDP per head — a measure of economic output divided by the population — increased by 0.7 per cent during the quarter and was 1.7 per cent higher than a year earlier. The improvement is encouraging, but GDP per head is not the same as a rise in wages or disposable household income. The cost of living, the distribution of growth and the number of people in work all influence how strongly economic expansion is felt by households.

Monthly figures also show that momentum was not equally strong throughout the quarter. GDP rose by 0.2 per cent in September after no growth in August, which the ONS revised down from an earlier estimate of 0.1 per cent. Output had increased by 0.4 per cent in July. The September improvement helped the quarterly result, but the flat August reading is a reminder that the recovery remains vulnerable to changes in demand.

Interest Rates And Inflation Complicate The Outlook

The stronger growth report arrives after the Bank of England raised Bank Rate by 0.25 percentage points to 4 per cent on November 5. The Monetary Policy Committee voted by eight to one for the increase, citing the risk that elevated global energy prices could feed into wider inflation. UK consumer price inflation reached 3.5 per cent in September, and the Bank expects it could rise to around 5 per cent by the middle of 2027 before easing.

Stronger economic activity can make it more difficult for the central bank to reduce inflation if demand remains resilient while energy costs rise. Higher interest rates, in turn, can increase mortgage costs, business financing expenses and the cost of investment. The Bank has said future decisions will depend on how energy prices, wages and underlying price-setting behaviour develop rather than following a predetermined path.

Reuters reported that the Bank of England’s November outlook put its 2026 growth forecast at 1.6 per cent, compared with the Office for Budget Responsibility’s 1.2 per cent projection made after the government’s October budget. The central bank attributed part of the improved outlook to AI-related spending and a temporary fiscal boost. The latest ONS data provide further evidence of resilience, although they do not guarantee that the same pace will continue in the final quarter.

What The Figures Mean For The UK Economy

The results give the government a stronger short-term growth picture than a weak headline from construction or retail alone might suggest. Technology-related services are supporting output, manufacturing has returned to growth and household spending has increased. But the economy’s dependence on business services and technology makes it important to examine whether those gains spread to other sectors and translate into higher productivity, secure jobs and stronger household incomes.

The construction figures are particularly important because housing shortages, infrastructure needs and private investment depend on a healthy pipeline of new work. A 4.7 per cent fall in private housing new work suggests that financing costs, affordability and confidence remain significant barriers. A sustained recovery will require more than a strong quarter from technology-related services.

HeadlinesXtra Analysis

The 0.7 per cent expansion is a meaningful improvement, but the composition of growth matters as much as the headline. AI and cloud-related activity are helping to lift information and communication services, and the ONS has identified this area as a major contributor to growth during 2026. Yet the statistics agency has been careful not to claim that AI alone explains the expansion. The broader gains in administrative, professional and business services show that the technology cycle is interacting with a wider services economy.

The more difficult test is whether this growth can be sustained without reigniting inflation. The Bank of England has already raised interest rates to 4 per cent because energy costs and domestic price pressures remain a concern. If higher rates continue to weigh on mortgages, construction and consumer spending, the economy could lose momentum even while technology-related investment remains strong.

For households, the most important measure will not be GDP alone but whether stronger output leads to improved real incomes, more secure employment and affordable housing. For businesses, the challenge is to turn AI-related investment into productivity gains that spread beyond a relatively narrow group of technology and consultancy firms. Britain has delivered its strongest quarterly growth in more than two years, but a balanced and durable recovery remains the next objective.

Sources And Further Reading