The UK’s economy shrank slightly in April as the Iran war began to have an impact on businesses, official data has indicated.
The economy contracted by 0.1% in the month, the Office for National Statistics (ONS) said, with some firms citing the conflict in the Middle East as having raised costs and affected turnover.
April’s contraction was the first monthly fall since August last year, but had been forecast by economists after stronger than expected growth in March.
Analysts said that after a good start to the year the economy was set to slow over the next few months, and they expect the Bank of England to keep interest rates unchanged when it meets next week.
In the three months to April, the ONS said the economy grew by 0.7% compared with the previous three-month period.
Area of the services sector which were particularly hard hit in April included arts and entertainment, sports activities and amusement and recreation activities.
The ONS said that “some of this fall can be attributed to the effects from the conflict in the Middle East, with the cancellation of multiple sporting events in the Middle East affecting the output of UK-based businesses”.
It added: “Some manufacturing industries, wholesale, warehousing and support activities for transportation, accommodation and travel agencies stated that the conflict in the Middle East had an impact, in terms of reduced turnover in April 2026.”
Responding to the figures, Chancellor of the Exchequer Rachel Reeves said that the war “will have an impact at home”.
“Before the conflict in the Middle East, growth was higher than expected and inflation was falling,” she said.
“The choices I have made as Chancellor mean our economy is in a stronger position to deal with the costs of the war.”