The UK economy started 2026 off with better momentum than many economists expected. Data from the ONS just came out and it says UK GDP grew 0.6% between January and March after growth of 0.2% during the final quarter of 2025. Monthly GDP also grew 0.3% in March after 0.4% growth in February.
Services produced most of the growth. The ONS said the services sector grew 0.8% during the quarter, with 11 of the 14 services subsectors recording growth. Wholesale trade expanded 3.1%, while retail trade recorded 1.6% growth.
Real GDP per head also grew 0.6% during the quarter and stood 0.9% higher than the same quarter one year earlier. The ONS said GDP per head measures the volume of goods and services available to the average person and works as one indicator of living standards.
Those numbers could help tech companies during the next few months. Consumer spending usually feeds into software subscriptions, cloud spending and business investment. Household consumption grew 0.6% during the quarter, helped by spending on transport, food and drink, recreation and culture. Business investment also grew 0.7%.
The UK also performed reasonably well compared with other G7 economies. ONS data showed the UK and the United States recorded the fastest quarterly GDP growth during the first quarter of 2026 at 0.6% and 0.5% respectively. Germany recorded 0.3%, Italy recorded 0.2% and France recorded no growth.
Why Are AI Companies Talking About Electricity Bills?
Economic growth may help technology companies, though AI infrastructure costs continue to go up. Data centres, cloud computing systems and AI training models require enormous computing power and energy use.
Matt Hawkins, chief executive of CUDO Compute, said the latest GDP numbers create an opening for the country’s AI ambitions, even as operating costs become harder for businesses to manage.
Hawkins said, “The UK’s latest GDP figures point to solid growth and a more confident economic backdrop, and therefore an opportunity to progress the country’s AI ambitions. However, while the government continues to position Britain as a global AI leader, the reality for enterprises building and scaling AI infrastructure is becoming increasingly difficult amidst geopolitical tensions and rising energy costs.”
Electricity now has a huge contribution to AI when it comes to its spending decisions. Hawkins said businesses are choosing deployment locations based on where computing power costs less to run.
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He said, “Electricity is now the defining cost in AI deployment, and businesses are increasingly making infrastructure decisions based on where compute is actually affordable to run. Our research found that 39% of organisations say electricity costs currently have the greatest impact on their total AI compute spend, while 27% say access to affordable power is the single biggest factor limiting their ability to scale AI workloads. Not policy, not the skills shortage, but the same thing that heats our homes and powers our work.”
That calculation creates problems for the UK tech sector. The government continues promoting the country as a global AI location, though energy prices now influence where companies build computing infrastructure.
ONS data also showed electricity, gas, steam and air conditioning supply grew 0.6% during the quarter.
Could High Energy Costs Hurt UK AI Ambitions?
Hawkins believes energy prices could damage long term AI investment if operating costs continue climbing.
He said, “Right now, geopolitical instability is driving energy market volatility and increasing operating costs. Businesses are being forced to make deployment decisions based on economics rather than national ambition. This isn’t a blame game as there are lots of factors at play – but those factors that are in our control need to be addressed.”
AI infrastructure requires expensive hardware, enormous electricity use and permanent computing capacity. Countries with lower operating costs may become more attractive destinations for AI deployment.
Research from CUDO Compute found that 43% of organisations place cost and performance ahead of sovereignty when deciding where to deploy AI infrastructure.
Hawkins said, “This tension has the potential to stifle growth. While AI sovereignty remains an important strategic priority, 43% of organisations say cost and performance still outweigh sovereignty considerations when deciding where to deploy AI infrastructure. The risk is clear: if the UK cannot provide a commercially viable environment for AI infrastructure, companies will simply build elsewhere.”
ONS data confirmed annual GDP growth for 2025 at 1.4%, compared with revised growth of 1.0% during 2024.
Economic growth gives technology companies a healthier environment for investment and expansion. Energy prices, computing costs and infrastructure spending now carry equal importance for AI businesses deciding where to build.
Hawkins said, “The UK still has a genuine opportunity to lead in AI, but that window will not remain open indefinitely. Economic growth is promising, but without more competitive energy pricing and a clearer focus on enabling infrastructure, we risk losing our advantage in the global AI race just as the technology begins to reshape the world economy.”
