UK economy grows 0.7% as AI sectors lift GDP

Britain's economy grew 0.7% in the third quarter, official data showed Thursday, as activity linked to artificial intelligence helped lift output.

The Office for National Statistics said the July-to-September gross domestic product reading accelerated from 0.5% growth in the second quarter. It was the fastest quarterly growth rate since the first three months of 2024, the ONS said.

The statistics office said growth was driven by strength in the services sector, particularly computer programming. It said many businesses reporting the largest increases in turnover were involved in artificial intelligence and cloud computing.

GDP grew 0.4% in July, stalled in August and expanded 0.2% in September.

Ruth Gregory, deputy chief UK economist at Capital Economics, said growth was unusually concentrated in AI-related sectors and that monthly data suggested the economy was entering the fourth quarter with more momentum than expected by Capital Economics.

The Bank of England last week raised its economic growth forecast for this year and next, citing strength in business investment linked to AI-related demand. It also raised its benchmark interest rate for the first time in more than three years as higher energy costs pushed up global inflation.

The central bank expects UK inflation to peak at 4.9% in the second quarter of next year in its central forecast. In a worst-case scenario in which oil prices rise far beyond $100 a barrel, it warned inflation could reach 6.2% in the third quarter of next year, up from 3.5% currently.