UK economy grows 0.7% in third quarter despite high energy prices

Growth picks up in the third quarter

UK gross domestic product rose 0.7% in the three months to the end of September, up from 0.5% growth in the second quarter. The Office for National Statistics published the figures on 12 November, alongside its estimate for September. The rate matched what City analysts had expected, and it is the fastest pace in two and a half years. A Reuters survey of economists had pointed to the same 0.7% rise. Consumers and businesses remained resilient despite high oil and gas prices, and official figures point to a consumer economy more robust than expected over the summer.

Q2 20260.5%

Q3 20260.7%

Q2 2026

0.5 %

Q3 2026

0.7 %

Data from the article text

Monthly and annual rates

Output grew 0.2% in September alone, against the 0% economists had expected for that month. The ONS revised its August estimate down to zero from the 0.1% first reported. Measured year on year, September came in at 2.1%, up from 2% in August and the highest annual rate since the 2.6% recorded in August 2022. Over the three months to September, the economy is estimated to be 1.9% larger than in the same period a year earlier.

August 20262%

September 20262.1%

August 2026

2 %

September 2026

2.1 %

Data from the article text

Energy prices and interest rates

The ONS said higher petrol, diesel and natural gas prices after the re-escalation of the Middle East conflict played an important role in restricting growth over the quarter. Oil rose above $100 a barrel in September and stayed above that level until early November. Natural gas prices were about three times their February level, before the United States and Israel attacked Iran. Oil has eased from its peak as production in the Middle East rebounded, though energy costs have soared since the war in Iran began in February. In the UK, higher motor fuel prices have pushed petrol above £1.70 a litre and diesel towards an average of £2 a litre, which has lifted inflation this year. Higher gas and electricity prices have also damaged household incomes, according to the Bank of England's assessment. The Bank of England voted in early November to raise its interest rate by a quarter of a percentage point to 4%, aiming to cool inflationary pressures.

Forecasts and the pound

The Office for Budget Responsibility had expected growth of 1.2% this year at the time of the November budget, a forecast that already looks out of date given that growth has kept beating expectations. The Bank of England upgraded its 2026 growth forecast to 1.6%, citing strong tech activity and investment that help offset damage to incomes from rising gas and electricity prices. Its upgraded forecasts came in the same week it raised rates to 4%. The central bank also warned that inflation is set to hit 5% next year and forecast growth slowing to 1.3% in 2027. The pound was steady after the data release, trading 0.2% lower against the dollar at $1.325.