The Office for National Statistics (ONS) has confirmed UK economic growth of 0.6% for the first quarter of 2026, leaving its initial estimate unrevised. However, growth in the final quarter of 2025 was revised down to 0.1% from the previously reported 0.2%.
2025 Annual Growth Revised Lower
The ONS revisions mean that GDP growth for the whole of 2025 now stands at 1.3%, down from an initial estimate of 1.4%. This follows expansion of 1.0% in 2024. The figures confirm strong expansion at the start of 2026 before the impact of the Iran war began to be felt.
Monthly data for April 2026 showed the economy contracted by 0.1%, a sharp slowdown from 0.3% growth in March, signalling a hit from the Middle East conflict. Although an interim peace deal has been agreed between the US and Iran, nearly four months of war and soaring fuel and energy costs are expected to weigh on growth throughout the year.
Household Finances Under Pressure
Real GDP per head, adjusted for inflation, increased by 0.6% in the first quarter of 2026 and was 0.7% higher than a year earlier. However, real household disposable income fell by 0.8%, a sharp reversal from a rise of 1.2% in the previous three months. The ONS attributed this to rising taxes offsetting higher incomes and inflation eroding spending power.
The household saving ratio fell by 0.7 percentage points to 8.9%, driven by a decline in savings other than pensions. Liz McKeown, director of economic statistics at the ONS, said: “Services were the main driver of growth in the latest quarter, with strength in computer programming, wholesale and advertising only partially offset by falls in rental companies and recruitment agencies.”
Sector Breakdown
The services sector grew by 0.8% in the first quarter, while both the construction and production sectors expanded by 0.2%. McKeown added: “Production and construction also both grew overall, although construction only partly reversed its recent weakness. The household saving ratio continued to ease at the start of 2026 but remains above its pre-pandemic levels.”
The Bank of England and major forecasters, including the International Monetary Fund and the Organisation for Economic Co-operation and Development, have downgraded their GDP forecasts for 2026 due to the war's economic impact.
