UK’s economy grows by 0.6% in Q1 2026 despite Middle-East conflict headwinds

The UK’s GDP grew by 0.6 per cent in the first quarter of 2026, following an increase of 0.2 per cent in Q4 of 2025. According to the data released on Thursday by the Office of National Statistics, the UK’s official statistics agency Office, the growth was primarily driven by the services sector which expanded by 0.8 per cent.

As per the data, within the services sector, wholesale and retail trade recorded a 2 per cent increase, becoming the largest positive contributor to growth. Other sectors, including production and construction, increased by 0.2 and 0.4 per cent, respectively, reflecting an uneven growth across sectors.

Defying forecasts of a 0.2 per cent contraction due to the Middle-East crisis, the GDP recorded 0.3 per cent growth in March, following 0.4 per cent growth in February and no growth in January.

However, despite the positive growth figures, scepticism remains about the growth momentum continuing into the second quarter. Economists suggest the recent spike might just be a temporary result of people and businesses stockpiling supplies to avoid upcoming price hikes and inventory shortages. Yael Selfin, the chief economist at KPMG, as quoted by The Guardian, said, “The adverse effect of the war in Iran on the economy is likely to show in the second quarter. We expect growth to slow, as higher costs and softer demand continue to weigh on activity.”

The UK’s Office for Budget Responsibility, an independent fiscal watchdog, earlier downgraded the UK's growth forecast for 2026 from 1.4 per cent, predicted in last year’s budget, to 1.1 per cent as the conflict continued to escalate. Similarly, the International Monetary Fund cut the UK's growth outlook to 0.8 per cent in April from the 1.3% prediction made in January before the war began.
Ready to Make a Smarter Property Decision? Build Your Legacy with TOI Homes.