UK economy grew 0.6% in first quarter as services drove expansion

The UK economy grew by 0.6% in the first quarter of 2026, according to revised figures from the Office for National Statistics (ONS), confirming a strong start to the year before recent geopolitical tensions began to weigh on activity.

The latest national accounts data left first-quarter gross domestic product (GDP) growth unchanged at 0.6%, while revising growth in the final quarter of 2025 down to 0.1% from the previously estimated 0.2%. As a result, GDP growth for 2025 has been revised slightly lower to 1.3%, from 1.4%, following 1.0% growth in 2024.

The figures reinforce the resilience of the UK economy at the beginning of the year, although more recent data points to a slowdown. The economy contracted by 0.1% in April after expanding by 0.3% in March, reflecting the impact of the conflict in the Middle East, which drove up energy and fuel prices and weighed on business activity.

While a ceasefire has since been agreed between the US and Iran, economists expect the effects of several months of conflict and elevated energy costs to continue to dampen economic growth during the remainder of 2026. The Bank of England, the International Monetary Fund and the Organisation for Economic Co-operation and Development have all downgraded their UK growth forecasts for the year.

The ONS said the services sector was the main engine of growth in the first quarter, expanding by 0.8%. Both the production and construction sectors also recorded growth of 0.2%.

Real GDP per head increased by 0.6% during the quarter and was 0.7% higher than a year earlier. However, households came under increasing financial pressure, with real household disposable income per person falling by 0.8% after rising by 1.2% in the previous quarter.

The ONS attributed the decline to higher taxes offsetting income growth, alongside the continuing impact of inflation on household spending power.

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.

“Production and construction also both grew overall, although construction only partly reversed its recent weakness.”

“Today’s figures confirm the economy made a steady start to the year, but business confidence is still finely balanced,” he said. “Most firms aren’t short of ambition, but are thinking carefully about every decision, from hiring and stock to equipment and expansion.”

Randall said the challenge for policymakers was not simply ensuring finance remained available but giving businesses the confidence to invest.

“With recent data showing 40% of SMEs are permanent non-borrowers, and would rather ‘grow slowly’ than borrow to grow, the challenge is not just about making finance available. It is about making it feel clear, practical and worth the risk.

“While we wait tentatively for the next chapter in Westminster, whoever steps into No.10 will need to understand the levers that actually unlock growth, including giving SMEs the confidence and financial support to invest rather than hold back.”