AI rollout boosts UK economy as fears of looming slowdown mount

The UK economy grew 0.7% in the third quarter of the year, according to early official figures confirming a boost from AI investment.

The Office for National Statistics (ONS) noted an acceleration in gross domestic product (GDP) from the 0.5% figure seen between April and June. It stated that the new quarterly figure was the highest since the first quarter of 2024.

That was despite just 0.2% growth being recorded in the month of September - the end of the latest three-month period that saw a rapid rise in fuel costs linked to the effects of the conflict in the Middle East and the Russia-Ukraine war.

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The resulting inflation pressures culminated in a Bank of England interest rate hike last week.

The energy-linked surge in prices is set to intensify in the coming months as wholesale natural gas costs remain elevated heading into the peak of winter.

They're currently 180% up on where they stood a year ago, threatening renewed harm to businesses and families alike, alongside the rise in borrowing costs.

ONS chief economist Grant Fitzner said of the latest data: "The economy grew robustly in the third quarter almost entirely due to strong and widespread growth in the services sector.

"Within services, computer programming again increased strongly, as it has all year, registering its fastest growth in the last three years. We continue to see evidence that AI linked businesses helped to boost this sector."

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The ONS data showed growth from computer programming, consultancy and related activities rose by 4.4%, cementing the category's position as the largest driver of GDP growth across 2026 to date. It will include investment in data centres.

There was evidence, the report added, that many of the businesses reporting the largest increases in turnover were involved in activities related to AI and cloud computing.

The data also suggested that consumer spending remained resilient during the July to September period.

There has been evidence of greater caution since.

While there is currently downwards pressure on fuel prices, businesses have already been swallowing big rises to their energy costs - bills that are already being passed on.

Households on the energy price cap saw a 4% increase in October. A hike above £440 is currently predicted from January by the energy supplier EDF.

The poorest households secured some aid to shield them from the worst in last month's budget but the intensity of the energy shock is one reason why financial market participants currently see at least two further interest rate hikes by March next year, according to London Stock Exchange Group data.

Chancellor John Healey said in response to the ONS figures: "The Middle East conflict has hit growth worldwide, yet Britain is showing stand-out resilience."

He added: "Our UK economy is growing at the fastest rate in almost ten years, outside the pandemic.

"We are backing UK investment, innovation and fast growth firms. I want to bring back confidence in Britain. Breathing space now and fresh hope for the future."

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Yael Selfin, chief economist at KPMG, expected a rough ride ahead.

She said: "We expect the economy to lose momentum in the fourth quarter and broadly flatline as higher energy prices and interest rates dampen consumer demand. The Bank of England is likely to raise rates again, probably in December, to defend against inflation risks.

"Household spending growth was subdued in the third quarter as higher inflation, elevated interest rates and soft consumer confidence continued to weigh on demand. Rising unemployment expectations are adding to the caution, particularly around discretionary spending."

(c) Sky News 2026: AI rollout boosts UK economy as fears of looming slowdown mount