Lead

The UK economy grew 0.3% in March, according to official figures from the Office for National Statistics (ONS), defying forecasts of a 0.2% contraction and suggesting the Iran war has not hit activity as badly as feared. Over the first three months of 2026, GDP rose 0.6%, a sharp acceleration from the 0.1% growth recorded in the final quarter of last year.

The figures, which cover the first full month of the conflict in the Middle East, were driven by a broad-based increase in the services sector, with computer programming and advertising performing particularly well, according to the ONS. Construction also returned to growth.

The better-than-expected data prompted the International Monetary Fund to upgrade its UK growth forecast for 2026 to 1%, up from 0.8%, citing “strong prewar momentum” and a robust first quarter, as reported by the ONS.

Coverage comparison

Coverage of the figures in The Guardian has highlighted both the surprising strength of the headline numbers and the headwinds facing households and policymakers. One report focused on the growth surprise, while another noted that the IMF’s upgrade reflected the UK’s “strong prewar momentum” and a solid first quarter.

All reports referenced the ONS data, though each took a slightly different angle. One piece emphasised the role of Chancellor Rachel Reeves in responding to the numbers, quoting her insistence that this was “not the time to put our economic stability at risk.” Another report highlighted the labour market’s mixed picture, noting that unemployment had unexpectedly risen to 5%.

The reports also noted that the UK’s growth rate now leads the G7, though they cautioned that first-quarter strength has not always been sustained in recent years.

Key claims

  • The UK economy grew 0.3% in March, according to the ONS, with a 0.6% rise in GDP over the first three months of 2026.
  • The services sector led growth, with computer programming and advertising doing particularly well, while construction returned to growth, the ONS said.
  • Inflation rose to 3.3% in March from 3% in February, after the Iran war triggered the biggest jump in fuel prices for more than three years, as reported by the ONS.
  • The unemployment rate rose to 5% in the three months to March, up from 4.9% in February, according to the ONS.
  • Wage growth slowed, with pay excluding bonuses rising 3.4% year on year in the three months to March, down from 3.6% in February. After inflation, real wage growth was just 0.3%.
  • The number of payrolled employees fell by 100,000 in April, following a 28,000 decline in March, according to the ONS tax data cited by the ONS.
  • According to the Resolution Foundation, the Iran war is expected to reduce typical household incomes by £550 this year and increase government borrowing by £16bn by the end of the decade—a projection that a single source reported on.

Perspectives

Chancellor Rachel Reeves said the figures demonstrated that her economic plan was working. “Now is not the time to put our economic stability at risk. To do so would leave families and business worse off,” she said, calling for continued discipline.

The reports note that the Chancellor’s comments could be read as a message to her own party, as well as to external critics, given internal Labour speculation about a possible leadership challenge.

However, the labour market data painted a more downbeat picture, with unemployment rising and wage growth slowing. One report quoted a Bank of England warning that higher inflation was “unavoidable” due to the conflict in the Middle East, and the Bank has said it may need to consider further interest rate rises.

While surveys suggest consumers are cutting back on discretionary spending and businesses face higher input costs, the surprisingly strong first-quarter figures have led some forecasters to moderate their gloom. Still, most economists expect a slowdown in the second half of the year.

The reports also noted that Britain’s growth rate is now the fastest among G7 nations, though this status has been achieved in spite of the war’s disruptions, and the overall economic outlook remains clouded by geopolitical uncertainty.