Britain’s economy grew more than expected in August, supported by a surge in manufacturing and continued strength in computer programming, offering a boost to finance minister John Healey ahead of his budget.
The Office for National Statistics reported a 0.1% increase in gross domestic product, defying economists’ expectations of a 0.1% contraction.
Annual growth accelerated to 2.1%, its highest level since October 2022, when economic activity was still recovering from the COVID-19 pandemic. Excluding that recovery period, the annual rate was the strongest since December 2019.
Computer programming emerged as the largest contributor to economic growth over the three months to August, strengthening indications that investment in artificial intelligence is supporting economic activity.
Andrew Wishart, senior economist at Berenberg Bank, said the breakdown of the figures suggested AI was driving much of the recent improvement. He added that consumer spending had also performed better than expected despite rising inflation.
The ONS reported broader growth across the services sector over the past year, while economist Thomas Pugh of RSM UK said the figures pointed to a stronger performance than the resilience often used to describe the economy.
August’s monthly growth was led by manufacturing output, which rose 1.2%, against forecasts for a slight decline. Services output remained unchanged, outperforming expectations of a 0.1% fall.
Computer programming grew by 1.1% during the month, leaving output in the sector 13% higher so far this year. The wider information and communications sector has expanded by 12% this year, compared with 2% in Germany and 0.2% in France.
Jake Finney, senior economist at PwC, said business investment, particularly in technology hardware, had played an important role in Britain’s stronger-than-expected performance. He noted, however, that the UK continued to lag behind the United States in both the scale of such investment and its contribution to growth.
Healey welcomed the figures, saying they demonstrated Britain’s ability to withstand global economic shocks despite conflicts in the Middle East and Europe.
The stronger data could also influence the Bank of England as policymakers consider whether to raise interest rates next month. Third-quarter growth appears on course to exceed the central bank’s forecast of 0.4%.
Pugh said the figures suggested interest rates might not be restraining economic activity as much as the Bank of England had anticipated.
However, the improved outlook presents only limited relief for Healey, who faces pressure to meet the government’s fiscal rules after long-term borrowing costs recently reached their highest levels since the 1990s. Government bond yields fell sharply on Thursday.
Britain was jointly the fastest-growing economy among the Group of Seven nations during the first half of 2026, alongside the United States.
The International Monetary Fund said earlier this week that higher energy prices and rising long-term interest rates were likely to weigh on UK growth next year. However, it raised its forecast for this year’s expansion to 1.3%, from its previous estimate of 1%.
Ojo Triumph
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