UK Economy Posts Unexpected March Growth Amid Iran War

The Office for National Statistics reported UK GDP rose 0.3 % in March 2026, giving a 0.6 % rise in Q1 and a 1 % year-on-year gain. The result beat a 0.2 % contraction forecast and was the strongest quarterly expansion since Q1 2025, driven by services, construction and manufacturing.

The Guardian

The Iran-Israel-US war began on 28 February 2026, closing the Strait of Hormuz and raising oil and gas prices. The energy shock lifted UK inflation to 3.3 % in March and prompted ONS data showing “front-loading” as consumers stocked up on fuel.

Wimbledon Times

Chancellor Rachel Reeves said the figures confirm the plan and warned “now is not the time to put our economic stability at risk”. The Bank of England warned higher inflation is unavoidable, signalled rate hikes and noted the shock could weigh on GDP growth.

The Guardian

The purchasing managers’ index rose in April and retail sales grew in March. Input-price inflation accelerated while job vacancies fell. Sports, amusement and recreation activity dropped 2.2 %. Resolution Foundation estimates war will cut household incomes by £550 this year and add £16 bn to borrowing by decade’s end.

The Guardian

The surprise growth shows resilience, but rising inflation, higher borrowing costs and uncertainty could erode confidence and expose the economy to a slowdown later in 2026.

The Guardian

Yael Selfin (KPMG) expects a Q2 slowdown as costs and softer demand weigh on activity, and Thomas Pugh (RSM) says the data mark the peak of growth this year. Ben Jones (CBI) warns that surging energy prices and borrowing costs could stall growth. Fergus Jimenez-England (NIESR) notes input-price inflation and falling job vacancies.

The Guardian

Analysts forecast a 0.2 % contraction for March, yet ONS reported a 0.3 % rise, creating a forecast-actual gap. No second-quarter data are available, leaving uncertainty about the war’s longer-term impact.

BBC News

• “The choices I have made as chancellor mean our economy is in a stronger position as we deal with the costs of the war in Iran.” — Rachel Reeves, Chancellor of the Exchequer

The Guardian

• “probably means we’ve already had almost all the growth we’re likely to see in the UK economy this year” — Thomas Pugh, Chief Economist, RSM

Wimbledon Times

• “He added: “Surging energy prices, higher borrowing costs and a renewed bout of political uncertainty will conspire to bring growth almost to a standstill for the rest of the year.” — Ben Jones, Lead Economist, CBI

Wimbledon Times

• “higher inflation is unavoidable” — Bank of England

The Guardian

The Bank of England is likely to raise rates as inflation stays above target, while analysts expect a Q2 slowdown and a possible Labour leadership contest adds further political uncertainty.

The Guardian