AI spending helps lift British growth to its fastest annual pace since 2022

Britain’s economy grew by 0.1% in August, the Office for National Statistics said on Thursday. Economists polled by Reuters had expected output to fall by 0.1%. Compared with August 2025, GDP was 2.1% higher, the fastest annual rate since October 2022. Several economists say much of the strength comes from spending on artificial intelligence.

Over the three months to August, output rose 0.7% compared with the previous three months, up from a revised 0.5% in the three months to July. The ONS revised June’s monthly growth up to 0.4% and left July’s 0.4% unchanged.

For a country whose economy has grown only slowly since the 2008 financial crisis, the numbers matter because of where the growth is coming from. The ONS said computer programming, consultancy and related activities made the largest contribution to three-month growth for the sixth month in a row. The statisticians do not measure AI as a separate category, but economists increasingly treat these activities as a sign of firms adopting the technology.

“The sector breakdown suggests that AI is behind much of the upswing,” Andrew Wishart, senior economist at Berenberg, told Reuters. Computer programming output rose 1.1% in August and is up 13% so far this year. Information and communication output fell slightly in the month but was 7.1% higher than a year earlier.

Economists at Deutsche Bank estimate that AI-related spending accounted for up to a third of British growth in the first seven months of the year. They point in particular to a jump in computer consultancy. Sanjay Raja, the bank’s chief UK economist, told The Wall Street Journal that roughly £50bn to £60bn of AI investment was announced in Britain last year. He said little of it appeared in the 2025 data but it was now coming through.

Barclays reached a similar view from another direction. Its economists estimate that IT and AI-related spending, including software, hardware and data centres, made up around 65% of UK business investment in the second quarter. Jake Finney, a senior economist at PwC, said investment in technology hardware had been an important driver of this year’s unexpectedly strong growth. He added that Britain still lags the United States both in how much it invests and in how much that investment adds to growth.

August itself was less broad. Production rose 0.8% in the month, helped by a 1.2% increase in manufacturing. Services output was flat and construction fell. Over three months, services grew 0.9%, while production fell 0.2% and construction 1.0%.

The figures follow an upgrade from the International Monetary Fund. On Tuesday it raised its forecast for British growth this year by 0.3 percentage points, to 1.3%, and also cited AI investment. The IMF warned, however, that higher energy prices and long-term interest rates would weigh on consumer spending and investment next year. Britain had the strongest growth in the G7 in the first half of 2026, as the economy held up better than feared against the energy shock from the war in Iran.

Some economists question whether the gains will last. Building data centres and buying software adds to output, but a lasting effect on Britain’s weak productivity depends on the technology spreading through the large services sector. Kallum Pickering, chief economist at the broker Peel Hunt, told the Journal that Britain’s light-touch regulation and open capital markets make it attractive for AI companies. He said the main obstacle is energy policy. Britain’s electricity prices are among the highest in the advanced world, and Pickering argued that the government needs to speed up new generating capacity to meet AI’s demand for power.

Some of the investment is already visible. Slough, about 25 miles west of London, has the largest cluster of data centres in Europe. Only northern Virginia has more worldwide. Earlier this year, the American logistics property group Prologis agreed to buy Segro, owner of the Slough Trading Estate, for $19bn.

The data arrive before the government’s budget, and the stronger growth gives the Treasury a little more room as it tries to meet its fiscal rules while long-term borrowing costs are high. They will also matter for the Bank of England. Third-quarter growth looks on course to beat the Bank’s 0.4% forecast, and economists polled by Reuters expect it to raise interest rates to 4% in November.