UK economy grew 0.5% in three months to February, but GDP uplift unlikely to last
The UK’s GDP grew by 0.5% in the year to February – an unexpected rise. But fast growth is unlikely to continue as the Iran war ravages the world economy.
The UK economy grew by 0.5% in the three months to February 2026, as official figures show the economy was accelerating before the Iran war broke out and scuppered hopes of further significant rises this year.
GDP growth in the three months to February was far faster than the 0.1% forecast by economists, with the largest contribution to growth being a 0.5% increase in output from the services sector, according to the Office for National Statistics (ONS).
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Grant Fitzner, the chief economist at the ONS, said: “Growth increased further in the three months to February, led by broad-based increases across services. Within services, growth was driven by wholesaling, market research, hospitality and publishing, which all performed well in the three months to February.”
Fitzner added that February’s growth was aided by Jaguar Land Rover when it resumed its car manufacturing operations following a damaging cyber attack in autumn 2025.
Chancellor Rachel Reeves responded to the figures, saying: “These growth figures show the government has the right plan to build a stronger, more resilient economy. But the war in Iran will come at a cost.”
Iran war set to slow growth in rest of 2026
While it is good news that the economy grew in the three months to February, hopes that growth will continue at this rate are farfetched as the economic impact of the Iran war is set to put the brakes on the UK economy.
With the supply of oil and other resources through the Strait of Hormuz, a narrow waterway between Iran and Oman through which around 20% of oil and much of the world’s liquefied natural gas (LNG) is transported, effectively at a standstill since the war began on 28 February, prices of oil and gas have soared.
This is expected to lead to a surge in energy prices in July and have already led to a hike in petrol and diesel prices.
This inflationary pressure is forecast to lead to fewer interest rate cuts, further putting a damper on economic growth in both Britain and the wider world, according to the International Monetary Fund (IMF).
As a result of the disruption to the world economy from the Iran war, the IMF gave its forecasts of UK GDP growth the biggest downgrade of any G7 country, and now expects growth of just 0.8%, down from the 1.3% it predicted in January.
Danni Hewson, head of financial analysis at AJ Bell, said: “It feels almost cruel that the UK economy had managed to find a higher gear in February and grew faster than had been thought in the opening days of 2026.
“After a disappointing end to 2025 – which was one of the factors in the IMF’s calculations suggesting the UK economy will take the biggest hit of G7 countries because of the Iran war – the start of this year had looked surprisingly buoyant.”
Hewson noted that the fall in output from the construction sector was a bad sign as it indicated housebuilders were continuing to display caution – “this will have only been exacerbated by the situation in the Middle East, which has altered the expected path of interest rates,” she added.
Meanwhile, Conservative shadow chancellor Mel Stride said that while any economic growth was welcome, “the IMF were clear this week that under Labour our economy is totally unprepared for the recent energy shock. They have cut their growth forecasts for the UK more than any G7 nation.
He criticised chancellor Rachel Reeves’s economic plan, saying: “Her choices have left us poorer, with soaring unemployment and the highest inflation in the G7. We need an urgent change of direction, cutting the benefits bill and drilling in the North Sea to deliver a stronger economy.”
