Britain's economy grew 0.1% in August, beating a Reuters poll of economists that had pointed to a 0.1% contraction, the Office for National Statistics (ONS) reported on Thursday. The stronger-than-expected reading gave finance minister John Healey a boost ahead of his budget. Annual growth picked up to 2.1%, the highest rate since October 2022, when output was still recovering from the COVID-19 pandemic.
Excluding that period, the ONS data show the fastest growth since December 2019. The ONS said computer programming was the largest contributor to growth in the three months to August, a result that adds to evidence that the artificial intelligence boom is supporting the UK economy. Andrew Wishart, senior economist at Berenberg Bank, said: “The sector breakdown suggests that AI is behind much of the upswing.” He also noted that consumer spending had surprised to the upside despite rising inflation.
In August alone, manufacturing output rose 1.2% month on month, defying forecasts for a small decline. Services were flat on the month, beating forecasts for a 0.1% dip, while computer programming grew 1.1% and was 13% higher so far this year, according to the ONS. The ONS also pointed to broad-based growth over the past year across the services sector, which dominates the British economy.
Jake Finney, senior economist at PwC, said business investment, particularly in tech hardware, had been an important driver of the unexpectedly strong performance this year. He added: “The UK still lags the US in both the scale of that investment and the boost it provides to growth, but it is making progress and remains ahead of many of its European peers.” According to national accounts data cited in the report, output in the wider information and communications sector has risen 12% this year in Britain, compared with 2% in Germany and 0.2% in France. Britain was jointly the fastest-growing economy among Group of Seven (G7) nations in the first half of 2026, alongside the United States.
The data complicate the fiscal picture for Healey. Long-term government borrowing costs have recently reached their highest level since the 1990s, and he still faces a narrow path to meeting his fiscal rules without unsettling investors, despite a sharp fall in government bond yields on Thursday. The figures could also influence Bank of England policymakers, who are weighing a rate rise next month.
Third-quarter growth is on course to exceed the central bank’s forecast of 0.4%. Thomas Pugh, chief economist at RSM UK, said this suggested that interest rates at current levels are not as restrictive as the Bank of England had assumed. He added: “We will have to stop talking about resilience and start talking about some genuinely respectable growth this year even if activity stagnates in Q4.” Healey welcomed the figures, saying in a statement: “Despite conflicts in the Middle East and Europe hitting people across the world, today’s figures offer more proof of Britain’s resilience in the face of these global shocks.” Earlier in the week, the International Monetary Fund raised its forecast for UK growth this year to 1.3% from 1.0%, but said higher energy prices and a rise in long-term interest rates are likely to weigh on British economic growth next year.
Source: Reuters, reporting by Andy Bruce; ONS monthly GDP estimate for August 2026; Global Banking & Finance Review.
Source: globalbankingandfinance.com