Better than expected start to 2026
The UK economy grew 0.7% in the first three months of 2026, the Office for National Statistics reported. The number beat the 0.6% forecast from economists. Consumer spending was the main driver, as people spent more than expected on services and goods. The services sector posted solid growth, while manufacturing and construction also contributed.
The data offers some relief after months of uncertainty caused by the Iran conflict and its effect on global energy prices. The UK, like many European nations, faced higher fuel costs after the Strait of Hormuz closure disrupted oil shipments. But the first-quarter numbers suggest the economy absorbed the shock better than many feared.
Headwinds remain on the horizon
Economists caution that the picture may darken in the second quarter. The conflict in the Middle East continues to create supply chain disruptions. Energy prices, while lower than their peak in March, remain above pre-conflict levels. The Bank of England has held interest rates steady, waiting to see how the economy evolves.
Business investment remains cautious. Many companies delayed spending decisions during the early months of the conflict. If the ceasefire with Iran holds and the Strait of Hormuz reopens, business confidence could rebound quickly. If not, the economy may face a bumpier road ahead.
Global trade outlook uncertain
The UK's trade performance was mixed. Exports to Europe held up well, but trade with Asia faced delays due to longer shipping routes around the Cape of Good Hope. The government has said it is working on contingency plans to support businesses affected by the ongoing disruptions.