AI helped the UK defy expectations – but will Britain’s resilience fizzle out?

The UK economy grew by 0.7% in the third quarter, its fastest expansion in two and a half years, defying forecasts made when John Healey became chancellor in July. The result puts Britain on course to be the G7’s second-fastest-growing economy this year, with AI-related investment and household spending helping to sustain growth.

IT and professional services accounted for about half of the increase in activity, while Deutsche Bank estimates AI-related spending added 0.3 to 0.4 percentage points to GDP growth this year. But the outlook is uncertain: a possible slowdown in technology investment could weaken one source of growth, and household energy bills are expected to rise by about a quarter in January, taking the average annual bill above £2,000. Cooling wage growth, rising inflation and expected interest-rate increases could further weigh on spending and growth.