UK gross domestic product expanded 0.7% quarter on quarter in the third quarter, in line with market expectations, with growth driven by services output.
Economists polled by Reuters had also forecast a 0.7% quarterly expansion. Over the three months to September, the UK economy grew 1.9% year on year.
The reading marks a slight improvement on the prior quarter. The Office for National Statistics had previously reported GDP growth of 0.5% in the second quarter and 0.6% in the first.
Services lead the expansion
The ONS said Thursday morning that services output rose 0.9% on the quarter, while production grew 0.1% and construction contracted 0.7%, with the gains and declines offsetting each other.
Within services, the information and communication sector was the main growth driver, rising 2.1% over the quarter.
"This sector was the biggest contributor to GDP growth in 2026. There is evidence that the strongest revenue performers are businesses engaged in artificial intelligence and cloud computing," the ONS said.
"However, limitations in the way we collect data mean we cannot quantify the specific contribution of these activities to company revenue."
On a monthly basis, the economy grew 0.2% in September, beating expectations of zero GDP growth. Revised figures showed no growth in August, meaning September represented a pickup from the prior month.
In a statement, UK Chancellor John Healey said that although the US-Iran war had weighed on global growth, the British economy had shown "outstanding resilience."
"Outside the pandemic period, the UK is growing at its fastest pace in nearly a decade," he said. Prime Minister Andy Burnham said third-quarter growth "offers hope for the future."
In early Thursday trading, sterling fell 0.2% against the dollar and was broadly flat versus the euro, while the yield on 10-year UK government bonds was little changed.
Scott Gardner, investment strategist at JPMorgan's personal investing division, said: "This is a decent set of economic data. Since the outbreak of the US-Iran war, the UK economy has continued to show relative resilience."
He cautioned, however, that the economy faces tests in the months ahead. "Sentiment is turning cautious ahead of the autumn budget, and combined with the uncertainty from the ongoing Middle East war, this is expected to weigh on economic confidence and activity. Some institutions have already downgraded their growth forecasts for next year, and the UK economy still faces multiple headwinds," he wrote in a research note.
AI as an "extra growth engine"
Suren Thiru, chief economist at the Institute of Chartered Accountants in England and Wales, said the UK's third-quarter performance was "particularly strong."
"This quarter, artificial intelligence became an extra growth engine. Firms stepped up investment across areas including infrastructure, technology hardware and computer programming, both strengthening their ability to withstand various headwinds and boosting overall economic activity," he said in a research note.
"The strong economic data further supports policymakers' view that the economy is resilient enough to withstand another rate hike, and puts a December increase squarely on the table."
The Bank of England raised interest rates last week for the first time in three years and warned that further increases may follow if the US-Iran conflict is not resolved.
Annual inflation in the UK jumped to 3.5% in September, and the central bank warned it could rise to around 5% by the middle of 2027.
In its November monetary policy report, the Bank of England said UK GDP growth had so far been "more resilient than expected," but it expected growth to slow in the fourth quarter of this year through 2027.
Market pricing currently implies a 73% probability that the Bank of England will raise rates at its final meeting of the year in December, according to LSEG data.
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