UK Economy Grows 0.7% in the Third Quarter as Services and Investment Pick Up

Britain's economy grew faster in the third quarter. Real gross domestic product rose 0.7% from July to September, the Office for National Statistics said on Thursday 12 November, after 0.5% in the second quarter. Output was 1.9% higher than a year earlier.

Services did most of the work, rising 0.9%, while factories added a little and building fell. On the spending side, households, the government and business investment all grew. The monthly figures released at the same time show GDP up 0.2% in September, after no growth in August, which the ONS revised down from 0.1%, and a 0.4% rise in July.

Where the growth came from

Business-facing services led the way, up 1.0% against 0.5% for consumer-facing services. Administrative and support activities jumped 4.1%, driven by a 6.6% rise in rental and leasing. Information and communication grew 2.1%, with computer programming and consultancy up 4.4%. The ONS says that industry has been the largest driver of growth across 2026, and that many of the firms reporting the biggest rises in turnover work in artificial intelligence and cloud computing, although it cannot measure that effect exactly.

Not everything grew. Education and accommodation and food services both fell 0.5%, with restaurants and other food and drink outlets down 1.9%. Thirteen of the 20 subsectors of the economy expanded in the quarter.

Production rose just 0.1%. Manufacturing climbed 0.9%, helped by a 4.6% jump in computer, electronic and optical products, but mining and quarrying fell 2.2%, energy supply 2.1% and water and waste 1.5%. Construction shrank 0.7% and is now 1.7% smaller than a year ago, as new private housing work dropped 4.7%.

Month by month

The monthly series shows how the quarter unfolded. GDP rose 0.4% in July, was flat in August and grew 0.2% in September. August was first reported as a 0.1% rise, so the revision trims some momentum going into the autumn.

September's gain was broad. Services output rose 0.2%, production 0.3% and construction 0.8%, a rebound after the weak summer for builders. Services had shrunk 0.1% in August, revised down from no change, and grew 0.5% in July.

Over the three months to September, GDP was 0.7% higher than in the three months to June. The ONS says this is the ninth three-month period of growth in a row. Growth over the three months to August was revised down to 0.6% from 0.7%, so the trend is still positive, if a little softer than first thought.

For traders, the monthly figure often moves the pound more than the quarterly one, because the quarter is partly known in advance from the July and August releases. This time the September rise of 0.2% landed between a flat August and a strong July, which leaves the short-term picture mixed.

Spending and investment

Household spending, adjusted for inflation, rose 0.6% and was 1.8% above its level a year earlier, with transport and housing the main sources of growth. Government consumption also rose 0.6%, mostly in public administration, defence and health.

Investment was the strongest part of the spending picture. Gross fixed capital formation, which covers spending on machinery, equipment, buildings and similar assets, rose 1.7% and was 4.1% higher than a year earlier, led by machinery and transport equipment. Business investment, a narrower measure, grew 0.4%. Inventories fell, mainly at wholesalers, and the trade deficit was 1.3% of nominal GDP, a figure the ONS notes is distorted by flows of non-monetary gold.

Real GDP per head, which adjusts for population growth, also rose 0.7% in the quarter and 1.7% over the year. That matters because headline growth driven only by a rising population says little about living standards; this time output per person kept pace.

What it means for the Bank of England

The Bank of England raised Bank Rate to 4% on 5 November by an 8-1 vote, with one member wanting a bigger rise, because energy prices have pushed inflation up. Policymakers worry most that higher prices feed into pay and service costs. A slowing economy would ease that risk; a growing one keeps it alive.

Thursday's figures lean toward the second case. Growth picked up, services were strong and investment rose, so the data give the Bank little reason to think demand is cooling fast. The flat August and modest September show the quarter's strength came early, though, and the third quarter is now history. The next big UK tests are the labour market report on 17 November and October consumer prices on 18 November, before the Bank's 17 December decision.

First estimates are also revised. The ONS says that since 2000 the average revision between the first estimate and the final figure three years later has been plus 0.08 percentage points, and the average size of revisions, up or down, 0.27 points. A 0.7% first print is strong enough that it would take an unusually large revision to change the story.

The pound before and after

Sterling came into the release on the back foot, but because of the dollar rather than British news. GBP/USD, derived from the ECB's reference rates, was 1.3307 on Wednesday 11 November, down from 1.3423 on Tuesday, after US consumer prices came in firm. That took the pair below its 20-day average of 1.3370, its 50-day average of 1.3357 and its 100-day average of 1.3396.

Thursday's European Central Bank (ECB) reference rate, set at about 13:15 UTC, will be the first official reading after the GDP release. For a sense of how the pound absorbs the news, compare it with EUR/GBP as well as GBP/USD: the euro cross strips out most of the dollar's move and shows the reaction to British data more cleanly. Our dollar report covers the US side.

What it means for traders

• Separate the pound from the dollar. A strong UK print can push EUR/GBP lower and GBP/JPY higher even on a day when GBP/USD falls because of US news.
• Watch the averages around 1.3360 to 1.3395 in GBP/USD. A close back above them would show the GDP data outweighing the dollar's strength; staying below keeps the 28 October low at 1.3290 in view.
• Mark 17 November, when the ONS publishes labour market figures at 07:00 UTC. Pay growth matters more to the Bank of England than one quarter of GDP.
• Keep risk small around 07:00 UTC releases. Liquidity is thin at that hour and spreads can widen sharply for a few minutes.
• Our GBP/USD analysis shows the live price and the levels we track.

Frequently asked

Sources: Office for National Statistics: GDP first quarterly estimate, UK, July to September 2026 · Office for National Statistics: GDP monthly estimate, UK, September 2026 · European Central Bank: euro foreign exchange reference rates · Bank of England: Monetary Policy Summary, November 2026