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The U.K. economy is expanding faster than the bleakest recent narratives suggested, led by services and supported by business investment. Artificial intelligence is part of that investment story, but official statistics do not yet show how much of GDP growth it has caused.
What the latest figures actually show
The Office for National Statistics (ONS) estimates that real U.K. GDP increased 0.5% in the second quarter of 2026, following 0.6% growth in the first quarter. The ONS also revised its estimate for total 2025 growth to 1.2% in its latest second-quarter bulletin.
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The latest monthly ONS release reports a 0.7% increase in output over the three months to August 2026. Services grew 0.9% over that period, while production fell 0.2%. That split matters: the current expansion is being carried mainly by the much larger services economy rather than by a broad-based surge across every sector.
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|---|---|---|
| Real GDP, 2026 Q1 | +0.6% | ONS quarterly estimate |
| Real GDP, 2026 Q2 | +0.5% | ONS quarterly estimate |
| GDP, 2025 | +1.2% | ONS annual figure revised in the 2026 Q2 bulletin |
| Output, three months to August 2026 | +0.7% | ONS monthly release |
| Services, three months to August 2026 | +0.9% | ONS monthly release |
| Production, three months to August 2026 | -0.2% | ONS monthly release |
| Business investment, year to 2025 Q3 | +2.7% | Increase reported by the Bank of England, driven by ICT and machinery |
“Defies gloomy predictions” should therefore be read narrowly. Actual output has been better than the most pessimistic expectations, but these figures do not establish a boom in productivity, household living standards or every part of the economy. GDP is revised as more information arrives, and quarterly growth can still be followed by weaker periods.
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Why the economy has held up
Services are doing most of the immediate work
The 0.9% services increase in the three months to August is the clearest explanation for the recent resilience. Because services account for most U.K. economic activity, steady expansion there can lift overall GDP even while production contracts. The data support a services-led recovery, not a simultaneous acceleration in manufacturing and other production industries.
Companies are still adding productive capacity
Business investment was 2.7% higher over the year to 2025 Q3, according to the Bank of England, with ICT and machinery providing the main impetus. Bank contacts also told the central bank that some firms were planning automation and AI spending instead of increasing headcount. Those reports are evidence of investment intentions and business behaviour among contacted firms; they are not a measured economy-wide estimate of jobs displaced or output created by AI.
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How the forecasts compare with the outturn
The International Monetary Fund recorded 1.4% U.K. growth in 2025 and projected 1.0% growth for 2026. It described the economy as resilient but exposed to shocks. Its July 2026 assessment said: “The UK economy has remained resilient, but the war in the Middle East has dampened near-term growth prospects.”
The different numbers are not necessarily contradictory. The ONS figures are realised national-accounts estimates for particular quarters and periods, while the IMF’s 2026 number was a conditional forecast made using information and assumptions available at the time. Forecasts are revised when energy prices, interest rates, trade conditions or geopolitical events change. A stronger first half than a pessimistic narrative expected does not guarantee that the full-year forecast will be exceeded.
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Where AI fits into the growth story
Investment is the first observable link
ICT and machinery investment can include systems that enable automation, data processing and AI deployment. The Bank of England’s contacts provide a second signal: some businesses are choosing automation and AI projects where they might otherwise have added workers. Together, these findings show that AI-related capital spending is appearing in business decisions, even though the national accounts do not isolate an “AI investment” line.
Adoption is real but concentrated
ONS business research found that 29% of companies were using AI, rising to almost 50% among the largest firms. In June 2026, 17% of companies reported using text generation with large language models and 14% reported visual-content creation.
| ONS measure | Share reported | Qualification |
|---|---|---|
| Companies using AI | 29% | ONS business measure |
| Largest companies using AI | Almost 50% | ONS business measure; applies to the largest-firm group |
| Text generation with large language models | 17% | Companies reporting use in June 2026 |
| Visual-content creation | 14% | Companies reporting use in June 2026 |
The concentration among larger firms helps explain why investment effects can show up in aggregate data before AI is widespread among small businesses. It also means the adoption percentages should not be treated as the share of workers, tasks or GDP affected.
How much GDP growth comes from AI?
There is no definitive official percentage yet. ONS is developing a thematic account to estimate AI’s economic role and says its measurement framework must catch up with rapidly changing intangible capital. The agency has warned that “AI is making material and rapid changes to the nature of intangible capital in the economy and is resulting in fundamental changes to the nature of work and drivers of GDP.”
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That measurement gap prevents a sound calculation from the available adoption figures. A company can use an AI tool without increasing sales, reducing costs or producing more output. Conversely, investment made now may raise productivity only after new processes, skills and organisational changes are in place. Until ONS can connect those channels to national accounts, it would be misleading to convert the 29% adoption rate, or the 17% and 14% task measures, into a percentage of GDP growth.
What could make the improvement last—or reverse it
Conditions for durable gains
- AI and other ICT investment must translate into measurable output or efficiency, not just higher spending.
- Firms need the skills, data, management changes and complementary equipment required to use new systems effectively.
- Adoption has to spread beyond the largest companies for gains to become broader and less concentrated.
- Demand, financing conditions, energy costs and trade access must remain supportive enough for businesses to keep investing.
Downside scenarios
The Bank of England has warned that if AI’s productivity and commercial benefits are smaller than expected, weaker investment could reduce global GDP and U.K. asset prices. That is a risk scenario, not a forecast that the downturn will occur. The IMF likewise points to geopolitical and demand risks, including the effects of conflict on near-term growth.
The most defensible reading of the current data is measured optimism: services and business investment have kept output growing, while AI is becoming visible in capital spending and company adoption. The size of AI’s eventual contribution to U.K. GDP remains an open statistical question rather than an established result.
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