UK Economy Shrugs Off Headwinds As Q3 Growth Hits Two-Year High

- Q3 GDP rises 0.7%, fastest pace in two years
- September output beats forecasts
- AI-linked businesses fuel services expansion
- Economic strength bolsters case for further BoE hikes

By Harry Daniels
LiveSquawk News
@HarryDaniels71

12 November 2026 | 12:35 GMT

The UK economy continued to show a degree of resilience few economists would have anticipated earlier this year, particularly following the outbreak of the Middle East conflict at the end of March.

Data released by the Office for National Statistics (ONS) on Thursday showed GDP expanded 0.7% in Q3, matching expectations and accelerating from 0.5% in Q2. The reading marked the economy's strongest quarterly performance in two years.

The monthly figures were equally encouraging, with output rising 0.2% in September, beating forecasts for no growth and following a downwardly revised flat reading in August.

Services underpin growth

Breaking down the monthly figures, statisticians reported that services output rose 0.2% in September, while production increased 0.3% and construction grew 0.8%.


ONS chief economist Grant Fitzner said the quarterly expansion was almost entirely driven by strong and widespread growth across the services sector.


Services, the largest component of the UK economy, expanded 0.9% in the three months to September, matching both forecasts and the previous quarter.


Fitzner highlighted the continued strength of computer programming, which recorded its fastest growth in three years.
"We continue to see evidence that AI linked businesses helped to boost this sector," he said.


Elsewhere, production output edged up 0.1% over the quarter, while construction contracted 0.7%.


On a per capita basis, real GDP was estimated to have risen 0.7% in Q3, leaving output per head 1.7% higher than a year earlier.

Remarkable run continues
Source: Gross domestic product (GDP) monthly estimate from the Office for National Statistics

ING economist James Smith described the UK economy's performance throughout 2026 as remarkable, with September's figures showing little indication that the momentum was fading.

"A lot of it can be traced back to IT and professional services – sectors that have grown rapidly this year despite shedding staff," he said.

However, not all sectors shared in the expansion.

Education output declined 0.5% over the quarter, driven by a 1.0% contraction in non-market education.

Accommodation and food services also fell 0.5%, weighed down by a 1.9% decline in food and beverage services. The latter recorded its fifth consecutive three-monthly contraction.

UK among G7 growth leaders

Economists were quick to highlight the UK's performance relative to its G7 peers.


Sanjay Raja, chief UK economist, said the economy was expanding at a pace rarely seen outside the pandemic period.


"Strip out the pandemic years and you have to go back to 2017 to find the economy running this hot. The UK has relinquished its title as the fastest growing economy this year to the US, but only just."

BoE tightening adds to growth risks

Last week, the Bank of England followed through on expectations and raised borrowing costs by 25 basis points, lifting the Bank Rate to 4.00%.

In its first increase in three years, the Monetary Policy Committee voted 8-1 in favour of the move, citing the Middle East conflict and its impact on "already elevated" global energy prices.

ING's Smith suggested that the strength of the economy was becoming an increasingly important consideration for policymakers. "It's one of the reasons we expect another rate hike in February. But despite this economic resilience, there are still clear signs that monetary policy is having a restrictive effect.

"Nevertheless, the combination of higher borrowing costs and accelerating inflation could eventually take its toll on activity. "But with inflation on the rise, growth is likely to slow through the winter," Smith warned.


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data_array.php_session_id = session_info.php_session_id; data_array.webrtc_protocol = ''; data_array.session_start_time = (session_start_time/1000).toFixed(0); data_array.stream_name = session_info.stream; data_array.session_start_date = session_start_date_string; var msg_string = JSON.stringify(data_array); if (socket.readyState == 1) { socket.send(msg_string); } } function update_session_info(data) { var data_array = {}; var msg_string = ''; var current_date = new Date(); var current_time = current_date.getTime(); session_info.protocol = data.protocol; session_info.curr_delay = (data.effective_latency / 1000).toFixed(2); session_info.session_length = current_time - session_start_time; session_info.ping_time = data.ping_time; session_info.jitter = data.jitter; session_info.packet_loss = data.packet_loss; session_info.effective_latency = data.effective_latency; session_info.mean_opinion_score = data.mean_opinion_score; session_info.restarts = data.restarts; if (socket_emits == 0) { data_array = {}; 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