Key Takeaways

• Q1 GDP beats expectations: UK economy grew 0.6% quarter-on-quarter, accelerating from Q4 2025’s 0.2% rise.
• Annual growth strong: GDP rose 1.1% year-on-year in Q1 — well above the 0.8% expected.
• March defies forecasts: Monthly GDP rose 0.3% in March, beating expectations for a 0.1% drop despite the Iran war.
• Services lead the way: The services sector was the biggest contributor, with construction and production also expanding.
• Peak likely behind: Pepperstone’s Michael Brown says “Q1 will mark the peak in terms of UK growth this year.”
• Downside risks loom: Risks are “clearly tilted to the downside” from the Middle East conflict and energy price surge.
• BoE on hold: The data is unlikely to move the Bank of England, which is expected to adopt a wait-and-see stance.
• Familiar pattern: UK economy has consistently performed well in Q1 over the past four years before losing steam.
• Starmer’s lifeline: The strong print offers some support to PM Keir Starmer’s embattled government amid declining support.
• Manufacturing vulnerable: The energy shock could further undermine already weak growth in manufacturing.
• Political risks compound: Starmer faces potential ouster, adding to economic headwinds.

The UK economy grew as expected in the first quarter of 2026, as a robust services sector helped the country weather disruptions stemming from geopolitical unrest in the Middle East.

GDP grew 0.6% quarter-on-quarter, with growth also picking up from a 0.2% rise in the fourth quarter of 2025, according to a first reading from the Office for National Statistics (ONS) released on Thursday.

GDP grew 1.1% year-on-year in the three months to March 31 — more than the 0.8% expected.

On a monthly basis, GDP grew 0.3% in March, defying expectations for a 0.1% drop as the Middle East conflict ramped up energy prices and disrupted major shipping lanes.

The services sector was the biggest contributor to the quarterly print, ONS data showed, although construction and production also expanded.

Strong Start, But Peak May Already Be Behind

The British economy was seen logging a strong start to 2026, with growth picking up steadily in January and February. But March was a point of uncertainty, especially with the onset of the U.S.-Israel war against Iran.

“It is highly likely that Q1 will mark the peak in terms of UK growth this year. Risks remain clearly tilted to the downside moving forwards, principally as a result of the ongoing Middle East conflict, and subsequent surge in energy prices,” Michael Brown, analyst at Pepperstone, said in a mailed comment.

Brown also noted that the Q1 data was unlikely to “move the needle” for the Bank of England in adjusting interest rates, with the central bank likely to adopt a wait-and-see stance on the economy.

A Lifeline for Starmer

The strong first-quarter print offers some support to Prime Minister Keir Starmer’s embattled government, as it grapples with declining support in the face of an expected increase in inflation.

However, the UK economy has over the past four years marked a consistent pattern of performing well in the first quarter before steadily losing steam in the remainder of the year. Pepperstone’s Brown also noted that this trend remained intact.

Storm Clouds on the Horizon

The economy now faces mounting risks from the Middle Eastern energy shock, which could further undermine already weak growth in the country’s manufacturing sector.

Heightened political uncertainty — especially as Starmer faces a potential ouster — could also add to the economic headwinds.