UK economic growth accelerated from 0.5% qoq in Q2 to 0.7% in Q3, matching market expectations, as strong business-facing services and technology-related activity supported the expansion. Annual GDP growth strengthened from 1.4% to 1.9%, also in line with forecasts. Meanwhile, monthly GDP growth improved from a downwardly revised 0.0% in August to 0.2% in September, exceeding expectations for stagnation. The figures from the Office for National Statistics (ONS) point to a stronger pace of economic expansion, although growth remained uneven across industries, with business services outperforming consumer-facing activities and construction continuing to contract.
Services were the main engine of quarterly growth, accelerating from 0.6% to 0.9%, led by business-facing activities. Non-consumer-facing services expanded 1.0%, compared with 0.5% growth in consumer-facing services. Administrative and support services rose 4.1%, information and communication increased 2.1%, and professional, scientific and technical activities grew 1.6%. Particularly notable was the 4.4% expansion in computer programming, consultancy and related activities, which contributed 0.15 percentage points to overall GDP growth. The ONS identified strong performance among businesses associated with artificial intelligence and cloud computing, although it cautioned that their precise contribution could not yet be quantified. Technology-related business activity has become an important source of UK growth, helping offset weaker performance elsewhere in the economy.
The expenditure breakdown also showed resilience, with household consumption rising 0.6% qoq and gross fixed capital formation increasing 1.7%, supported by machinery and transport equipment. Business investment grew a more modest 0.4%, while export volumes increased 1.6%. Manufacturing output rose 0.9%, including a 4.6% expansion in computer, electronic and optical products, another area potentially benefiting from AI-related demand. However, the strength was far from universal. Construction contracted 0.7%, dragged down by a 1.6% fall in new work and a 4.7% decline in private housing construction. Accommodation and food services also fell 0.5%, including a 1.9% contraction in food and beverage services, highlighting continued weakness in parts of the consumer economy.
September’s monthly figures provided a more mixed conclusion to the quarter. Services grew 0.2%, manufacturing increased 0.7%, and construction rebounded 0.8% following four consecutive monthly declines. However, computer programming and consultancy output fell 1.9% after six consecutive monthly increases, while August’s GDP estimate was revised down from 0.1% growth to stagnation. These developments suggest that Q3’s stronger expansion was supported by identifiable pockets of business and technology strength rather than uniformly accelerating activity across the economy. The UK enters the final quarter with firmer growth momentum than earlier in the year, but persistent construction weakness, uneven household demand and fluctuations in technology-related output leave uncertainty over how broadly that momentum can be sustained.
Data Summary — UK Q3 GDP
| Indicator | Q3 | Exp. | Q2 |
|---|---|---|---|
| GDP (qoq) | +0.7% | +0.7% | +0.5% |
| GDP (yoy) | +1.9% | +1.9% | +1.4% |
| Services (qoq) | +0.9% | — | +0.6% |
| Production (qoq) | +0.1% | — | -0.1% |
| Construction (qoq) | -0.7% | — | — |
Data Summary — UK September GDP
| Indicator | Sep | Exp. | Aug |
|---|---|---|---|
| GDP (mom) | +0.2% | 0.0% | 0.0% |
| Industrial production (mom) | +0.3% | -0.4% | +0.7% |
| Manufacturing production (mom) | +0.7% | -0.5% | +0.7% |
Key Takeaways
- UK GDP growth accelerated from 0.5% to 0.7% qoq in Q3, matching expectations, while annual growth strengthened from 1.4% to 1.9%. September GDP rose 0.2% mom, exceeding forecasts for stagnation, although August was revised down to zero growth.
- Business-facing services and AI-related activity led the expansion. Services growth accelerated from 0.6% to 0.9%, with computer programming and consultancy rising 4.4% and contributing 0.15 percentage points to overall GDP growth. The ONS highlighted strong activity among AI- and cloud-computing-related businesses, although their precise contribution remains unquantified.
- Growth remained uneven despite the stronger headline figures. Construction contracted 0.7%, private housing new work declined 4.7%, and accommodation and food services fell 0.5%. Meanwhile, computer programming and consultancy output dropped 1.9% in September, raising questions about the sustainability of recent technology-led growth.
