UK Economy Expected to Grow 0.7% on AI, Defence Spending
The UK economy grew 0.7% in the third quarter, according to Office for National Statistics data released Thursday. That is up from 0.5% growth in the second quarter.
- 1.9% annual growth is the highest in almost two years.
- 0.7% matched what economists had forecast before the release.
- Business investment in tech, infrastructure and defence helped drive output.
- AI and cloud computing firms posted some of July's largest turnover.
Why it matters: Growth held up while households and businesses absorbed higher energy costs tied to the Iran war. Investment spending offset part of that squeeze.
- ONS chief economist Grant Fitzner credited services for nearly all the growth.
- Manufacturing and construction face more pressure from energy and borrowing costs.
How 5 sources split on this story
Where they split: Coverage differs on the main driver: some reports emphasize AI and defence investment, while the ONS credits services.
Left coverage, 1 sources: The left frames the figures as investment-led resilience that economists expect to fade as inflation and rates bite.
Right coverage, 2 sources: The right frames the figures as a welcome boost for households, with The Sun calling it a surprise despite matching forecasts.
What’s next: Sanjay Raja, chief UK economist at Deutsche Bank, expects growth to cool in the fourth quarter. He pointed to higher inflation and interest rates.
- Raja called November survey data "surprisingly resilient."
- How much of the quarter's growth came from AI and defence spending versus consumer services?
- Will investment spending keep offsetting energy costs if interest rates stay high?
