Britain’s technology sector is doing more heavy lifting than previously understood, with AI and cloud computing activity credited for powering the country’s best sustained growth outside the pandemic era.
Official figures released Thursday confirmed the UK economy expanded by 0.7% in the three months to September, matching analyst forecasts and accelerating from 0.5% growth recorded in the prior quarter.
The information and communication sector led the charge, surging 2.1% over the period and cementing its status as the single largest contributor to GDP expansion throughout 2026.
The Office for National Statistics noted that businesses reporting the sharpest increases in turnover were predominantly those engaged in artificial intelligence and cloud computing, though it cautioned that precise measurement remained elusive.
Suren Thiru, chief economist at the Institute of Chartered Accountants in England and Wales, described it as “a strikingly strong third quarter” driven by a distinct technological force.
“AI fired up as an extra engine of growth in the quarter, with businesses ramping up investment, including in infrastructure, tech hardware and computer programming, to strengthen their resilience against growing headwinds, while also boosting economic activity,” he said.
Thiru also drew a direct line between the strong data and monetary policy, warning that “these robust figures help keep a December interest rate rise firmly on the table by reinforcing policymakers’ view that the economy remains resilient enough to cope with another rise in borrowing costs.”
Markets are already leaning that direction, with traders assigning a 73% probability to a further Bank of England rate increase at December’s final meeting of the year, according to LSEG data.
That would represent a second consecutive hike, after the Bank raised borrowing costs last week for the first time in three years, citing the inflationary pressures generated by the ongoing US-Iran conflict.
UK annual inflation climbed to 3.5% in September, and the Bank has cautioned that the figure could approach 5% by the middle of 2027 if the Middle East situation remains unresolved.
The broader GDP picture showed services output rising 0.9%, more than compensating for a 0.1% gain in production and a 0.7% contraction in construction during the same period.
On a yearly basis, the economy grew 1.9% in the three months through September, while September alone delivered 0.2% monthly growth, outpacing expectations that output would be flat after a stagnant August.
Finance minister John Healey struck a confident tone, declaring that the UK was demonstrating “stand-out resilience” even as the US-Iran war dragged on global growth prospects.
“Our U.K. economy is growing at the fastest rate in almost ten years, outside the pandemic,” Healey said, framing the figures as validation of the government’s economic approach.
Prime Minister Andy Burnham echoed that sentiment, saying the results were “bringing hope for the future,” though analysts urged caution about what lies ahead.
Scott Gardner, investment strategist at J.P. Morgan Personal Investing, acknowledged a “decent set of results” but pointed to the Autumn Budget and continued Middle East uncertainty as factors likely to weigh on confidence in future readings.
“With some already trimming their growth forecasts for next year, the U.K. economy still faces several headwinds,” Gardner warned, tempering the broadly positive mood surrounding Thursday’s release.
Sterling slipped 0.2% against the dollar on the news while holding steady against the euro, and UK government bond yields moved little, suggesting markets had largely anticipated the outcome.
The Bank of England’s November Monetary Policy Report acknowledged that growth had proved “more resilient than expected” this year, but projected a slowdown in output through the final quarter and into 2027.