The UK economy grew faster in the third quarter as computer programming output surged, but the Bank of England expects energy costs and tighter financial conditions to slow expansion over the coming quarters.
The Office for National Statistics (ONS) said gross domestic product rose 0.7% between July and September, following a 0.5% increase in the previous quarter. Output was 1.9% higher than in the same period a year earlier.
Services output advanced 0.9%, production edged up 0.1% and construction contracted 0.7%. Within information and communication, output climbed 2.1%, while computer programming, consultancy and related activities rose 4.4%. The ONS ranked this industry as the largest contributor to GDP growth recorded so far this year.
Some of the businesses reporting the biggest turnover increases worked in AI or cloud computing, according to the ONS. The agency said its data collection could not measure the precise effect of those technologies on turnover.
Household consumption rose 0.6%, and gross fixed capital formation increased 1.7%. Business investment rose 0.4%. The Bank of England said AI demand had given partial support to business investment and services sold between companies, echoing its earlier assessment that AI was aiding UK activity.
The central bank expects that support to fade and forecasts slower growth over the next several quarters as inflation, tighter financial conditions and fiscal consolidation weigh on activity. On Nov. 5, its Monetary Policy Committee voted 8-1 to raise Bank Rate by 0.25 percentage points to 4%. CPI inflation was 3.5% in September; the Bank expects it to reach about 5% by mid-2027.
The Bank linked the energy shock to the continuing conflict in the Middle East and estimated that Ofgem’s cap could reach about £2,150 a year in the first quarter of 2027. Ofgem’s current cap corresponds to an estimated annual bill of £1,723 for a typical Direct Debit household in England, Scotland and Wales for October through December 2026. The next cap has not been set.
The October Budget provides a £100 Household Energy Payment from January 2027 for eligible households in council tax bands A to D in England and extends a temporary VAT cut on domestic electricity through July 2027. The Bank said households and businesses reduced their energy use after the 2022 shock, limiting the effect on activity compared with initial expectations.
Ofgem is scheduled to announce the next cap on Nov. 25.
