UK economy grows 0.6% in Q1 2026, beats expectations despite West Asia conflict headwinds – Firstpost

The United Kingdom economy expanded by 0.6 per cent in the first quarter of 2026, official data showed on Thursday, signalling resilience even as global uncertainty stemming from the conflict in West Asia weighed on sentiment.

Separate monthly figures also showed that GDP grew by 0.3 per cent in March, marking the first full month of economic activity captured after the outbreak of the Iran conflict on 28 February. Economists had expected a contraction of 0.1 to 0.2 per cent for the month, underscoring the extent to which activity surprised on the upside.

The data, released by the UK’s official statistics agency Office for National Statistics, points to a stronger-than-anticipated start to the year, even as forecasters warn that external shocks could weigh on momentum in the quarters ahead.

Services sector drives growth

Growth in the January–March period was primarily powered by the dominant services sector, which expanded by 0.8 per cent. Production output rose by 0.2 per cent, while construction activity increased by 0.4 per cent, highlighting a broad-based but uneven recovery across industries.

Within services, wholesale and retail trade — including repair of motor vehicles and motorcycles — recorded a 2.0 per cent increase. Information and communication services rose 1.7 per cent, while professional, scientific and technical activities grew 1.2 per cent.

For March alone, services output increased by 0.3 per cent, while production rose sharply by 1.5 per cent, even as construction activity slipped by 0.2 per cent.

Surprise beat on expectations

The stronger-than-expected performance follows a robust February reading, when the
UK economy expanded by 0.5 per cent — its fastest monthly pace in over two years. That figure had already exceeded consensus expectations of a 0.1 per cent rise, reinforcing the perception of short-term resilience in activity data.

West Asia conflict clouds outlook

March marked the first full month reflecting economic conditions after the outbreak of conflict in West Asia, which has added volatility to energy markets, supply chains and investor sentiment.

While the latest GDP print suggests limited immediate damage, economists warn that the broader impact may emerge with a lag, particularly if energy prices remain elevated or trade flows are disrupted.

The UK economy had grown by 1.4 per cent in 2025, but official and multilateral forecasters have already begun revising down expectations for 2026.

The UK’s fiscal watchdog Office for Budget Responsibility had earlier lowered its 2026 growth forecast from 1.4 per cent to 1.1 per cent, citing weaker productivity and external risks — though that projection predates the escalation in West Asia.

Similarly, the International Monetary Fund cut its UK growth outlook to 0.8 per cent, warning that the conflict could weigh heavily on advanced economies with high energy exposure and trade sensitivity.