The UK economy unexpectedly grew during the first full month of the Iran war, according to official figures, suggesting the Middle East conflict has not yet affected growth as much as feared.<\/p>\n
Figures from the Office for National Statistics (ONS) showed growth of 0.3% in gross domestic product (GDP) in March, down from a revised 0.4% rise in February<\/a> and 0% growth in January. The ONS had originally estimated that the economy grew 0.5% in February and 0.1% in January.<\/p>\n The figure for March was significantly better than economists\u2019 expectations, which had forecast GDP would shrink by 0.2%.<\/p>\n Over the first three months of 2026, GDP rose 0.6%, up sharply from growth of 0.1% in the final three months of last year. It also grew by 1% compared with the same quarter in 2025.<\/p>\n Simon Pittaway, a senior economist at the Resolution Foundation, said: \u201cFor the third year in a row, the UK economy made a fast start to the year. Respectable growth of 0.6% in early 2026 makes the UK currently the fastest growing economy in the G7.\u201d<\/p>\n The ONS said that growth in the first quarter was \u201cled by broad-based increases across the services sector\u201d, which grew by 0.8%. It added that the computer programming and advertising industries \u201cperformed particularly well\u201d, while construction returned to growth, rising by 0.4%, although this was driven by repair and maintenance work rather than new work. Production, which includes industries such as manufacturing also rose, by 0.2%.<\/p>\n However, on a monthly basis, the biggest downward effect on GDP growth was a 6.4% fall in travel agency and tour operator activities, suggesting the Middle East conflict was leading consumers to reconsider their holiday plans.<\/p>\n The March figure is one of the first official signs that the Iran war, which broke out on the final day of February, is not affecting activity for businesses and consumers as badly as expected, despite soaring oil and gas prices<\/a> due to the closure of the strait of Hormuz.<\/p>\n Rachel Reeves, the chancellor, said the figures showed the government had \u201cthe right economic plan\u201d. She said: \u201cThe choices I have made as chancellor mean our economy is in a stronger position as we deal with the costs of the war in Iran.\u201d<\/p>\n Reeves hinted at the in-fighting happening within the Labour party as Keir Starmer fights to hang on to his job<\/a>. She added: \u201cNow is not the time to put our economic stability at risk. To do so would leave families and business worse off. Instead, this government is getting on with the job of building an economy that is stronger, more resilient, and prepared for the future.\u201d<\/p>\n She told the BBC: \u201cWe shouldn\u2019t put that at risk by plunging the country into chaos at a time when there is conflict in the world, but also at a time when our plan to grow the economy is starting to bear fruit.\u201d<\/p>\n She added that, after seeing the growth in the economy, \u201cI\u2019ll be able to set out more plans to support families and businesses with the challenges that have come from this conflict in the Middle East, and I look forward to setting those out next week.\u201d<\/p>\n Reeves has said any financial support for households would be \u201ctargeted\u201d<\/a> at those most in need.<\/p>\n Living standards also improved at the fastest pace since 2022, according to the ONS. Real GDP per head grew 0.6% in the first quarter, up from 0.1% from the last three months of 2025.<\/p>\n The GDP reading ties in with some business surveys that suggest the economy has managed to maintain momentum despite the Middle East conflict.<\/p>\n The closely watched purchasing managers index (PMI) for the UK showed business activity rising in April<\/a> due to upturns in manufacturing production and output from the services sector. Retail sales also rose in March,<\/a> even when excluding the increased cost of fuel, according to the ONS.<\/p>\n