The UK economy expanded by 0.7% in the three months to September, marking its quickest growth in over two years. This acceleration from the previous quarter indicates a resilient performance despite higher energy prices linked to the Iran war. The services sector drove this surge, with computer programming recording its fastest growth in three years on AI-related spending. Prime Minister Andy Burnham called the figures "welcome news," noting that global events have pushed up domestic costs while the economy continues to grow. These results place the UK on course to be the second-fastest growing economy among major G7 nations, including Canada, Japan, Germany, Italy, and France.
Services drive the recovery
Grant Fitzner, chief economist at the Office for National Statistics, stated it was "possible growth could have been even stronger" if there hadn’t been a war in the Middle East. He warned that households may not feel better off because prices might soon start to rise more quickly than wages. Jake Finney, senior economist at PwC, cautioned that growth is likely to slow unless energy markets stabilise, pointing to a sharp rise in energy bills forecast for January that will hit consumer spending and confidence. Richard Benc, founder of Studio Underdog, reports sales are better than expected, with the business projecting growth this year despite some UK customers taking longer to buy watches. His company exports about 80% of its watches, seeing surprising resilience particularly from US customers.
Sector-specific momentum
Computer programming and consultancy services have been the biggest drivers of growth so far this year, outpacing other parts of the services sector which includes hotels and restaurants. The robust expansion suggests the economy is far more resilient than anticipated during the summer months. However, the outlook remains fragile as external pressures continue to weigh on household budgets. A sharp increase in energy costs is set to test consumer confidence in the coming months, potentially offsetting the current momentum in specific high-tech service areas. The contrast between strong industrial output and stagnant household wealth highlights the uneven nature of this economic recovery.
