UK economy grows more strongly than expected despite Iran war uncertainty

The UK economy grew more strongly than expected in the first quarter of 2026, with official figures showing resilience despite geopolitical uncertainty following the outbreak of the Iran war.

According to the latest data from the Office for National Statistics (ONS), real gross domestic product (GDP) increased by 0.6% in the three months to March 2026, building on growth of 0.5% in the previous rolling quarter.

The figures showed the UK’s dominant services sector was the main driver of growth, expanding by 0.8% over the quarter, with wholesale and retail trade making the largest positive contributions. Production output rose by 0.2%, while construction output grew by 0.4% after five consecutive three-month declines.

In March alone – the first full month after the outbreak of the Iran war – the economy grew by 0.3%, outperforming economists’ expectations that output would contract amid rising geopolitical tensions and market uncertainty.

Services output and construction both increased by 0.3% and 1.5% respectively during the month, partially offset by a 0.2% fall in production output.

The ONS also revised some previous figures, including an upward revision to GDP growth in the three months to January 2026 from 0.3% to 0.4%.

Commenting on the figures, Mike Randall, chief executive of Simply Asset Finance, said the data demonstrated the resilience of UK businesses despite continued economic pressures.

“An uptick in both monthly and quarterly GDP suggests that the UK economy defied expectations in the first quarter, with businesses continuing to show resilience despite ongoing cost pressures,” he said.

“If these figures show us anything, it’s that growth can survive under pressure – but it cannot be taken for granted. With the UK on the precipice of yet more political change, the Government must prioritise the needs of growing UK businesses to maintain this momentum and give them the confidence they need to invest – regardless of who may be sat around the table in the months ahead.”

The stronger-than-expected GDP figures are likely to ease some concerns over the immediate economic impact of the Iran conflict, although economists continue to warn that ongoing geopolitical instability, inflationary pressures and higher borrowing costs could weigh on growth later in the year.