UK Economy Grows 0.7% in Third Quarter, Fastest in Two Years
The UK economy grew by 0.7% between July and September, its quickest pace in more than two years. That is better than many expected after a summer of higher energy costs.
What drove the quarter
Services helped lift the figures. It is the largest part of the economy and covers consultancy and computer programming as well as hotels and restaurants. Computer programming had its fastest growth in three years, helped by cloud computing and spending linked to artificial intelligence.
That sector and consultancy have been the biggest driver of growth so far this year. Sarah Coles of the investment platform AJ Bell described it as back-office work that is less visible. She said administrative and support services grew strongly, and tied those areas to wider use of AI.
Investors have lately worried about slower AI development in the US and about whether AI firms' business models can last. Businesses have kept investing in the technology anyway.
How ministers read the figures
Prime Minister Andy Burnham called the numbers welcome news. Chancellor John Healey told the BBC they showed "remarkable resilience" in the face of global conflicts, and he hopes they bring back confidence in Britain.
Healey was also asked how government decisions could claim credit when AI investment is the main driver. He said ministers can help or hinder business confidence and investment.
On the international comparison, the figures put the UK on course to be the second fastest growing economy among the major G7 countries. The group also includes Canada, Japan, Germany, Italy and France.
Energy costs hang over the next months
Grant Fitzner, chief economist at the Office for National Statistics, said it was "possible growth could have been even stronger" without the war in the Middle East. He added that households may still not feel better off, and that prices might soon start to rise more quickly than wages.
Jake Finney, a senior economist at PwC, cautioned that growth would probably slow over the coming months unless energy markets stabilise. Bills are forecast to jump in January, and he expects that to weigh on spending and confidence.
High energy costs are being driven by the conflict in the Middle East and Russia's invasion of Ukraine. US and Israeli attacks led Iran to block the Strait of Hormuz, a vital shipping route for oil and gas. Russia and Ukraine have also attacked each other's oil refineries, which squeezes global refining capacity and pushes up diesel and petrol prices.
Richard Benc, founder of the mechanical watch company Studio Underdog, said sales are better than he expected and the firm still projects growth this year. It exports about 80% of its watches and has seen resilience from US customers, though some UK customers are now taking longer to buy.
Source: BBC News