The UK economy grew by 0.7 per cent in the third quarter, its fastest pace in more than two years, according to figures published today by the Office for National Statistics, with investment in artificial intelligence among the factors behind the increase.
Growth in gross domestic product between July and September was in line with estimates from City economists and above the 0.4 per cent forecast by the Bank of England.
It was the strongest quarter for output since the first three months of 2024. Excluding the pandemic, the figures put the economy at its highest level of performance since 2017.
The ONS said monthly output rose by 0.2 per cent in September, ahead of a projection of no growth. The estimate for August was revised down to zero from an initial 0.1 per cent.
John Healey, the chancellor, said the UK is “showing stand-out resilience. Our economy is growing at the fastest rate in almost ten years, outside the pandemic.”
Growth was again led by the services sector, which makes up nearly three-quarters of the economy. Within services, IT and communications was the largest contributor, and has been the single biggest driver of economic growth this year.
The ONS pointed to “evidence that many of the businesses reporting the largest increases in turnover are involved in activities related to artificial intelligence and cloud computing” in the computer programming industry.
Elsewhere, the ONS said output from production firms, which include manufacturers, rose by 0.1 per cent in the quarter, while construction output fell by 0.7 per cent. The full breakdown is set out in the ONS first quarterly estimate of GDP for July to September.
Sandra Horsfield, an economist at Investec, said: “Whereas the UK is not as prominently involved as some Asian companies in AI chip production, AI-related services do appear to be playing an increasing role in supporting economic activity.”
Horsfield calculated that 0.2 percentage points of the 0.7 per cent quarterly growth can be attributed to the impact of AI.
The data comes as adoption of the technology remains uneven across the country, with research published this week finding that Yorkshire has the lowest AI adoption rate among SMEs of any UK region.
Household expenditure rose by 0.6 per cent in the quarter, as consumers drew on their savings to support spending. A measure of business investment increased by 0.35 per cent, the strongest period for private sector investment since 2022, according to the figures.
Analysts said the rise in investment may also be linked to the rollout of AI technology. Government spending increased by 0.2 per cent between June and September.
Economists expect growth to slow in the final three months of the year, as rising energy bills and higher inflation reduce consumers’ spending power.
Inflation stands at 3.6 per cent and the unemployment rate has dipped to 4.7 per cent, according to the latest official figures, which will be updated next week.
The stronger than expected figures make a further rise in interest rates more likely in the coming months, economists said. The Bank of England raised the base rate to 4 per cent on 5 November, its first increase in three years, following months of speculation that an oil price shock from the Middle East war could force a rate rise.
Jamie Young
Jamie Young is Senior Reporter at Business Matters, covering SME finance, employment law and Westminster policy since 2016. He has reported on every Budget and Autumn Statement since 2018, helped make sense of the ‘covid era’ and the bounce-back loan scheme from launch through the fraud investigations, and broke the magazine’s coverage of the 2024 late-payment reforms. He joined Business Matters straight from completing his BA in Administration from Exeter University and is NCTJ-qualified. Reach him at jyoung@cbmeg.co.uk
#GDP #growth #hits #cent #quarter #boost
