UK economic growth is expected to have picked up in the third quarter of 2026, as a spending drive on artificial intelligence and defence helps offset the cost-of-living slowdown. The Office for National Statistics (ONS) will publish the latest gross domestic product (GDP) figures on Thursday 12 November at 7am.

Economists are expecting growth of 0.7% for the third quarter, between July and September, following growth of 0.5% in the second quarter. Growth has been boosted by business investment, with spending on technology, infrastructure and defence becoming a key source of growth in the economy, experts think.

AI and defence drive investment

Sanjay Raja, chief UK economist for Deutsche Bank, said a few key sectors were boosting business investment: data centres and IT, defence and aircraft. The AI spending boom was a contributor to higher GDP in July, with the ONS revealing that many of the businesses reporting the largest turnover were involved in activities related to AI and cloud computing.

Consumers have also kept spending, despite the energy shock. Mr Raja said consumers had been out in force, and businesses had remained fairly confident regardless of still-elevated geopolitical uncertainty. That resilience is helping to offset the impact of higher energy prices on households and businesses since the start of the Iran war.

Economists are also expecting growth in other areas of the economy, such as hospitality, which benefited from a spending boost over the summer, and healthcare activity. Those gains could help offset weaknesses in sectors more likely to be squeezed by higher energy prices and borrowing costs, such as manufacturing and construction.

What the latest data showed

Monthly GDP grew by 0.1% in August, the ONS said on 15 October. July was unrevised at 0.4% and June was revised up to 0.4% from 0.3%. August was driven by production, meaning manufacturing, mining, energy and water, which rose by 0.8%. Services showed no growth and construction fell by 0.2%, its fourth consecutive monthly fall.

The ONS cautions that monthly growth rates can be volatile and should be read alongside the three-month rate. GDP rose by 0.7% in the three months to August against the three months to May, the eighth consecutive three-month rise. Calendar estimates, whose source and sample size are not stated, put September monthly growth at 0.0% and third-quarter growth at 0.7% on the previous quarter.

Growth expected to cool in the final quarter

Mr Raja cautioned that growth is set to slow over the final quarter of 2026 as higher inflation and interest rates begin to weigh. Looking ahead, he said, the UK economic growth story is expected to have cooled a bit. But he added that there had been surprisingly resilient survey data into November, and that pre-Budget uncertainty was kept to a minimum this year, which may have kept business activity more stable.

The Bank of England raised the Bank Rate to 4.00% from 3.75% last Thursday, its first increase in more than three years. A weaker GDP print than the calendar estimate would test that decision, and a stronger one would support it. Sterling is the quickest read on the release: the pound was quoted at about 1.33 against the US dollar on Wednesday morning.

Thursday's release will be watched for the September month, for any revisions to July and August, and for the gap between the headline figure and the weaker momentum suggested by business surveys. The Bank of England's own survey-based model puts the economy's underlying momentum in the third quarter at about 0.2%, well below the 0.7% headline figure economists expect.