- UK GDP expanded by 0.6 per cent between January and March, the fastest quarterly growth in a year.
- The services sector drove most of the growth, rising 0.8 per cent in the first quarter.
- Economists warn the economic impact of the Iran war and rising energy costs could slow growth later in 2026.
Britain’s economy grew faster than expected during the first three months of 2026, offering a temporary boost for the government as businesses and households continue navigating rising costs and global uncertainty.
Official figures from the Office for National Statistics showed UK gross domestic product expanded by 0.6 per cent between January and March, marking the strongest quarterly growth in a year. The figure matched forecasts from City economists and represented a clear rebound from the 0.2 per cent growth recorded during the final quarter of 2025.
The stronger performance was largely driven by the UK’s dominant services sector, which accounts for more than three-quarters of the economy. Services output rose 0.8 per cent during the quarter, helping offset weaker momentum elsewhere.
Production industries, including manufacturing, grew by 0.2 per cent, while construction activity increased by 0.4 per cent.
The March figures also surprised analysts.
The economy expanded by 0.3 per cent during the month after a 0.4 per cent increase in February. Economists had previously expected a contraction amid rising energy prices and disruption linked to the US-Iran conflict.
Strong quarter, but economists remain cautious
Despite the upbeat headline figures, economists are warning the momentum may not last long.
The Bank of England had already cautioned that recent years have shown a pattern of unusually strong first-quarter growth followed by weaker performance later in the year. The central bank previously forecast the economy would grow by around 0.5 per cent in the first quarter before slowing sharply during the rest of 2026.
The Bank expects annual economic growth for the year to remain below 1 per cent as higher inflation, expensive energy and weaker consumer demand begin weighing more heavily on households and businesses.
Analysts say the latest figures may partly reflect economic activity before the wider effects of the Iran conflict filtered through supply chains, energy markets and consumer confidence.
Ruth Gregory, deputy chief UK economist at Capital Economics, reportedly said the economy had performed “remarkably well” during the early stages of the energy price shock, but added she would be “very surprised” if growth did not weaken from May onwards.
Yael Selfin, chief economist at KPMG, also reportedly warned that the effects of the Iran war were likely to become more visible in the second quarter as higher costs and softer demand begin affecting business activity more directly.
Political pressure still hangs over the recovery
The growth figures arrive during a politically sensitive period for the Labour government, with markets closely watching the future direction of economic policy amid pressure inside Westminster.
Chancellor Rachel Reeves reportedly said the figures showed the government had “the right economic plan” and argued Britain was in a stronger position to deal with the economic fallout from the war in Iran.
She also reportedly warned against risking economic stability at a time when households and businesses are already under pressure from rising living costs.
Still, some economists remain cautious about reading too much into one quarter of stronger growth.
Questions have also emerged around whether the Office for National Statistics may be overstating early-year economic momentum, as similar patterns have appeared repeatedly in recent years before fading later in the calendar year.
For now, the figures offer some relief for the government and the Bank of England after months of sluggish growth. But with energy prices still elevated, inflation pressures lingering and geopolitical tensions continuing to disrupt markets, many economists believe the tougher test for Britain’s economy may still be ahead.
