The UK economy grew by 0.6% in the first quarter of 2026, defying expectations amid the ongoing Iran war, according to figures from the Office for National Statistics (ONS). The growth was driven by a rebound in retail and construction sectors.
Key Takeaways
The UK economy grew by 0.6% between January and March, defying expectations amid the Iran war. Growth was driven by sectors like retail and construction, but analysts predict slower growth ahead due to rising energy prices.
- UK GDP grew 0.6% in Q1 2026
- March saw a surprise 0.3% growth despite Iran conflict
- Retail and construction led economic rebound
- Analysts warn of slowing growth due to higher energy costs
March saw a surprise 0.3% growth, contradicting forecasts that predicted a contraction due to the conflict. However, analysts warn that this growth may not be sustainable as rising energy prices begin to impact household budgets and business operations.
The ONS reported that the services sector, particularly wholesale, computer programming, and advertising, contributed significantly to the economic uptick. Chancellor Rachel Reeves emphasized the government's role in stabilizing the economy during turbulent times but cautioned against political instability.
Shadow chancellor Mel Stride criticized Labour leadership speculation, stating it was destabilizing for the economy. Economists like Yael Selfin from KPMG predict that the full impact of the Iran war will become more apparent in the second quarter as energy and food prices rise, squeezing disposable incomes.
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