UK Economy Beats Forecasts With 0.6% Q1 Growth Despite Iran War Headwinds

The UK delivered stronger-than-expected economic growth in the first quarter of 2026, BBC Business reported Thursday, as official data showed UK economy growth of 0.6% between January and March.

March Surprise Lifts the Quarter

The Office for National Statistics said the economy expanded by 0.3% in March alone. That figure confounded analyst forecasts calling for a slight contraction. March was the first complete month following the outbreak of the Iran war. Services led the quarterly advance, with wholesale trade, computer programming and advertising all performing strongly. Construction also returned to growth, though the ONS cautioned it had not fully recovered from weakness late last year.

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Political Turbulence Complicates the Picture

Chancellor Rachel Reeves welcomed the figures in comments to the BBC. She said strong growth would allow the government to invest further in public services and support households with rising living costs. But she also addressed swirling speculation over Prime Minister Keir Starmer’s political future. Reeves warned against destabilising the country during a period of both international conflict and what she described as a plan for growth beginning to bear fruit. Shadow chancellor Mel Stride pushed back sharply, blaming Labour leadership uncertainty for a jump in UK borrowing costs to their highest level in roughly 30 years.

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A Look Back at Recent Revisions

The quarterly headline masks some softness beneath. The ONS revised February’s growth figure down to 0.4% from an earlier reading of 0.5%. January was trimmed to zero from a previously reported 0.1%. GDP estimates are subject to further revision in coming months, adding caution to any celebration.

War Effects Set to Bite Harder

Economists are broadly cautious about what comes next. Yael Selfin, chief economist at KPMG, said the Iran conflict’s drag on activity will likely be more visible in the second quarter. She pointed to climbing energy and petrol prices alongside expected food cost increases as threats to household disposable incomes. Ruth Gregory, deputy chief UK economist at Capital Economics, was more direct. She described the Q1 print as likely the high point for the year. Gregory warned that a stockpiling boost will unwind, energy costs will squeeze real incomes further, and in an adverse scenario the UK could slip into a mild recession. Luke Bartholomew of Aberdeen Investments added that political uncertainty over fiscal policy is another brake on business investment.

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