The UK economy grew by 0.3% in March, the first month of the Iran war, defying expectations of a 0.2% contraction. The Office for National Statistics reported gross domestic product rose 0.6% in the first quarter of 2026, making Britain the fastest-growing economy in the G7 and up from 0.1% in the final quarter of 2025.
Chancellor Rachel Reeves seized on the figures as evidence that the Labour government’s economic plan is working. “Now is not the time to put our economic stability at risk,” she said, in a thinly veiled reference to internal party divisions threatening Prime Minister Sir Keir Starmer’s leadership. Reeves added that any support for households amid the conflict would be targeted at those most in need.
The ONS said growth was driven by a broad-based 0.8% expansion in the services sector, with computer programming and advertising performing well. Construction also returned to growth, rising 0.4%, though this was largely due to repair and maintenance work. However, travel agency and tour operator activities fell 6.4%, suggesting the conflict was deterring holiday plans.
Economists cautioned that the strong start to the year may not last. Ruth Gregory of Capital Economics noted the economy performed “remarkably well” at the start of the energy price shock, but said the war’s effects would sap growth from the second quarter. Yael Selfin of KPMG also expected “higher costs and softer demand” to weigh on activity in the coming months.
Despite the upbeat data, political turmoil continues. Speculation that Starmer could be ousted has raised questions over Reeves’s future, as a new leader might want a fresh chancellor. However, with government borrowing costs rising amid uncertainty, some allies argue that keeping Reeves in place could calm bond markets and signal fiscal continuity.
