UK economy records surprise 0.3% growth in first month of the Iran war

"Figures from the Office for National Statistics (ONS) showed growth of 0.3% in gross domestic product (GDP) in March, from a revised 0.4% rise in February and 0% growth in January. The ONS had originally estimated that the economy grew 0.5% in February and 0.1% in January. The figure for March was significantly better than economists' expectations, which had forecast GDP would shrink by 0.2%."

"Over the first three months of 2026, GDP rose 0.6%, up sharply from growth of 0.1% in the final three months of last year. The ONS said that growth in the first quarter was led by broad-based increases across the services sector. It added that the computer programming and advertising industries performed particularly well, while construction returned to growth."

"The March figure is one of the first official signs that the Iran war which broke out on the final day of February is not affecting activity for businesses and consumers as badly as expected, despite soaring oil and gas prices due to the closure of the strait of Hormuz. The GDP reading ties in with some business surveys that suggest the economy has managed to maintain momentum despite the Middle East conflict."

"However, the Bank of England warned last month that the UK may also need to brace for higher interest rates in the coming months as higher inflation is unavoidable because of the war in the Middle East. Inflation rose to 3.3% in March from 3% in February, after the Iran war triggered the biggest jump in fuel prices for more than three years."

UK GDP rose 0.3% in March, following revised growth of 0.4% in February and 0% in January. The March result exceeded expectations of a 0.2% contraction and followed stronger performance in the first quarter, with GDP up 0.6% over the first three months of 2026. Growth was driven by broad-based increases in services, with computer programming and advertising performing particularly well, while construction returned to growth. Business activity increased in April according to the purchasing managers index, supported by manufacturing and services output. Retail sales rose in March, excluding higher fuel costs. Inflation increased to 3.3% in March from 3% in February due to fuel price jumps linked to the Iran war, and higher interest rates may follow.

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