UK GDP grew by 0.7% in Q3, following growth of 0.5% in Q2.
The latest ONS figures show that Q3’s economic output was the strongest since 2018, tying with Q4 2024.
GDP is now estimated to be 1.9% higher compared with the same quarter a year ago.
In output terms, growth in the latest quarter was mainly caused by a 0.9% increase in the services sector (in particular business-facing services), while the production sector increased by 0.1% and the construction sector fell by 0.7%.
Real GDP per head is estimated to have increased by 0.7% in Quarter 3 2026 and is up by 1.7% compared with the same quarter a year ago.
Monthly GDP grew by 0.2% in September, after remaining flat in August and showing growth of 0.4% in July.
George Lagarias, chief economist at Forvis Mazars, commented: “Not wholly unexpected but still very welcome strength from an economy that has so far managed to absorb the energy shock.
“Excluding post-Covid recovery, Q3’s economic output was the strongest since 2018 (tying with Q4 2024). The economy outperformed thanks to strong consumption, AI and the global capital expenditure cycle, and government spending in dwellings. The fact that the announcement was within consensus takes nothing away from what is a clear win.
“Having said that, it also brings forward the question of interest rates. With unemployment dropping and wage growth picking up in the past couple of months, strong growth may also come with higher interest rates. Thus far, bond markets are pricing in three rate hikes until mid-2027, but if economic performance persists, the Bank of England might be compelled to act faster.”
Scott Gardner, investment strategist at J.P. Morgan Personal Investing, said: “The UK economy delivered solid growth in the third quarter with the economy beating expectations during September. While much of the third quarter growth took place in July, this won’t overshadow a decent set of results with the UK economy still proving to be relatively resilient since the US-Iran war started.
“Driving this, manufacturing and services industries continue to expand with new orders remaining positive. The services sector continues to show strong growth with AI spending providing a small uplift to activity. On the other side of the coin, there was a slowdown in consumption with retail sales and consumer discretionary spending falling during September. Real wage growth continues to ease as private sector wages flatten, putting a strain on spending as households start feeling the inflationary impact of the war in the Middle East.
“While the UK economy has been relatively resilient since the conflict started, that strength will be tested in the months ahead. Nervousness in the lead up to the Autumn Budget and continued uncertainty from the Middle East war is expected to weigh on confidence and activity over the coming GDP readings. With some already trimming their growth forecasts for next year, the UK economy still faces several headwinds.”
Samuel Fuller, director of Financial Markets Online, added: “Britain’s stiff upper lip economy is proving surprisingly resilient to global shocks. This is excellent news for the government’s cost of borrowing but bad news for everyone else’s cost of borrowing.
“Apart from a nervous surge earlier this week, gilt yields - the price the government pays on its debt - have been relatively calm following last month’s ‘steady as she goes’ Budget from new Chancellor John Healey.
“The economy as a whole was 1.9% larger in Q3 than it was during the same three months last year. If retailers deliver a strong ‘golden quarter’ in the run-up to Christmas, growth for 2026 as a whole should easily surpass the Bank of England’s 1.6% forecast.
“This is the fly in the ointment for anyone thinking of moving home, or the hundreds of thousands due to remortgage in coming months, because it opens the door to higher interest rates.
“Last week the Bank forecast that inflation will hit 4.9% in 2027, and these robust GDP numbers give it a free hand to worry less about growth and focus solely on tackling inflation.
“One week on from its decision to increase its base rate for the first time in over three years, the chances of another rate rise in December have notched up.
“With the average five-year fixed rate mortgage already charging interest of 6%, the prospect of even higher interest rates could slam the brakes on the already embattled property market and drag down house prices further.”
