UK GDP grows 0.7% in third quarter, led by services
Key Facts
UK real gross domestic product grew 0.7% in the third quarter of 2026, following growth of 0.5% in the second quarter, according to the preliminary estimate published by the UK Office for National Statistics on 12 November. The actual reading matched the level forecast by economists in a Reuters poll ahead of the data. It was the strongest quarterly growth since the first quarter of 2026, when GDP rose 0.6%. Year on year, GDP was 1.9% higher than in the third quarter of 2025. The figures reflect an acceleration in activity during the quarter, with clear differences in performance across the main sectors.
Services led the expansion, with output rising 0.9% in the third quarter, compared with an increase of 0.6% in the second quarter, and standing 2.3% above its level in the same period a year earlier. By contrast, production output rose 0.1%, while construction activity fell 0.7%. Within services, business-facing and non-consumer-facing activity grew 1.0%, compared with a 0.5% increase in consumer-facing services. The divergence shows that the improvement in services was broader among activities serving businesses. Thirteen of the 20 subsectors also recorded growth during the quarter.
Administrative and support services, alongside information and communication and professional, scientific and technical activities, were the largest positive contributors to services growth, according to the Office for National Statistics. On the expenditure side, third-quarter growth was driven mainly by household consumption and gross fixed capital formation. Business investment rose 0.4% during the quarter, standing 3.0% above its level in the third quarter of the previous year. Investment therefore improved both quarterly and annually among the components of activity that supported GDP. Deutsche Bank economists said early signs of improving productivity and higher capital spending supported activity, citing spending on artificial intelligence, defence and industrial policy.
Real GDP per capita rose 0.7% in the third quarter, standing 1.7% above its level in the same period a year earlier. Nominal GDP increased 1.4% during the quarter and was up 4.3% year on year. The GDP deflator, a broad measure of prices in the domestic economy, rose 2.3% compared with the third quarter of 2025. These indicators provide a parallel view of real growth by measuring changes in output at nominal values and domestic prices. On households, Deutsche Bank economists warned that the energy shock continues to weigh on disposable income.
Annual inflation in the UK rose to 3.5% in the 12 months to September, from 3.1% in August, according to the Office for National Statistics. Transport, particularly motor fuel, made the largest upward contribution to the change in the annual rate between the two months. Restaurants and hotels, by contrast, made the largest downward contribution. This came as GDP recorded stronger quarterly growth, while sector performance remained uneven across services, production and construction. The office scheduled the next consumer price inflation data release for 18 November.
The third-quarter GDP reading remains a preliminary estimate that may be revised as more detailed information becomes available. Since the first quarter of 2000, the average revision to the final estimate has been 0.08 percentage points in the positive direction, while the average absolute revision has been 0.27 percentage points. The Office for National Statistics has scheduled the next quarterly GDP estimate for 22 December 2026. The subsequent reading will update the estimate of economic performance in the third quarter once the available information is complete. Until then, the published estimate is based on quarterly growth of 0.7%, with services and spending supporting activity.