The United Kingdom's gross domestic product (GDP) grew by 0.6 percent in the first quarter of 2026, following an increase of 0.2 percent in the fourth quarter of 2025. According to data released on Thursday by the Office for National Statistics (ONS), the UK's official statistics agency, the growth was primarily driven by the services sector, which expanded by 0.8 percent.
Services Sector Performance
Within the services sector, wholesale and retail trade recorded a 2 percent increase, becoming the largest positive contributor to growth. Other sectors, including production and construction, increased by 0.2 percent and 0.4 percent, respectively, reflecting uneven growth across different parts of the economy.
Monthly GDP Data
Defying forecasts of a 0.2 percent contraction due to the Middle East crisis, GDP recorded 0.3 percent growth in March. This followed 0.4 percent growth in February and no growth in January. The March figure surprised many economists who had anticipated a downturn.
Concerns Over Sustainability
Despite the positive growth figures, skepticism remains about the growth momentum continuing into the second quarter. Economists suggest the recent spike might be a temporary result of people and businesses stockpiling supplies to avoid upcoming price hikes and inventory shortages. Yael Selfin, 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."
Forecast Downgrades
The UK's Office for Budget Responsibility (OBR), an independent fiscal watchdog, earlier downgraded the UK's growth forecast for 2026 from 1.4 percent, predicted in last year's budget, to 1.1 percent as the conflict continued to escalate. Similarly, the International Monetary Fund (IMF) cut the UK's growth outlook to 0.8 percent in April from the 1.3 percent prediction made in January before the war began.
Economic Outlook
While the Q1 performance has provided a boost, the ongoing geopolitical tensions and rising costs pose significant risks. The services sector remains a key driver, but uneven growth across production and construction highlights underlying vulnerabilities. Policymakers and businesses will be closely watching Q2 data to assess the true trajectory of the UK economy.
