U.K. Economy Beats Forecasts With 0.1% August Growth as AI Boom Lifts Output
The ONS reported 0.1% GDP growth in August, beating a Reuters poll that forecast a decline, as computer programming led gains and annual growth reached 2.1%, its fastest pace since 2022.
Britain’s economy beat forecasts in August as a further jump in the computer programming sector offered fresh evidence that the AI boom is boosting growth, according to Reuters, citing official data released Thursday.
The Office for National Statistics reported gross domestic product grew 0.1% on the month, stronger than the 0.1% decline expected by economists in a Reuters poll. The annual growth rate picked up to 2.1%, the highest reading since October 2022, and excluding the pandemic rebound, the fastest since December 2019.
Computer programming was the largest contributor to growth in the three months to August. The sector grew 1.1% in August alone, leaving its output 13% higher so far this year. Manufacturing also surged 1.2% on the month, defying forecasts for a small drop in output, while the services sector was flat, beating a forecast dip.
Why the Bank of England is watching
The data feeds into the central bank’s next decision. Third-quarter growth is on course to exceed the Bank of England’s forecast of 0.4%, and economists said interest rates may not be as restrictive as policymakers had assumed. “The sector breakdown suggests that AI is behind much of the upswing,” said Andrew Wishart, senior economist at Berenberg Bank, adding that consumer spending had also surprised to the upside despite rising inflation.
Thomas Pugh, chief economist at audit firm RSM UK, said the year could bring “genuinely respectable growth” even if activity stagnates in the fourth quarter. Output in the wider information and communications sector has increased 12% this year in Britain, compared with 2% in Germany and 0.2% in France, according to national accounts data.
A narrow path for the budget
The figures hand finance minister John Healey a boost ahead of his budget, but the path stays tight. Long-term government borrowing costs recently hit their highest since the 1990s, narrowing room to meet fiscal rules without unsettling investors. Earlier this week, the International Monetary Fund revised its 2026 U.K. growth forecast up to 1.3% from 1.0%, while warning higher energy prices and long-term interest rates could weigh on growth next year.
“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,” Healey said in a statement. Britain was jointly the fastest-growing economy among Group of Seven nations in the first half of 2026, alongside the United States.
Reporting based on coverage by Reuters.
