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Britain’s economy grew faster than expected in the first quarter, giving the government a rare positive data point as energy costs and political uncertainty weighed on the outlook. The Office for National Statistics said gross domestic product expanded by 0.6% in the first three months of the year.
The economy also grew by 0.3% in March, beating forecasts for a monthly contraction. However, economists warned that the strong start may not last, as the Iran war raises oil prices, lifts import costs, and adds pressure on the Bank of England.
The ONS data showed broad growth across the UK economy in March. Services, construction, and manufacturing all expanded during the month. The services sector, which makes up the largest share of the economy, helped drive the quarterly gain.
The first-quarter result followed weak momentum in the second half of last year. It also marked another strong start to the year for the UK economy. Economists noted that similar patterns appeared in the first quarters of 2024 and 2025.
However, some analysts questioned whether the figures fully reflected the underlying strength of the economy. The ONS said it was reviewing seasonal adjustment methods after post-pandemic spending patterns changed the timing of activity.
ING economist James Smith said, “It seems that something’s not quite right with the way the data is being seasonally adjusted.” He said the issue may relate to higher inflation and the timing of annual price increases.
The Iran war has added new pressure to the UK economy through higher global energy prices. Strikes on energy infrastructure and disruption in the Strait of Hormuz have pushed oil prices higher since the conflict began.
Economists said some businesses may have brought activity forward in March before costs rose further. Raj Badiani, economics director at S&P Global Market Intelligence, said stockpiling linked to the Iran war may have supported demand during the month.
Badiani also warned that the outlook had weakened. “Nevertheless, recession risks have risen, and we now expect the UK economy to contract mildly in the second and third quarters of this year,” he said.
The ONS also said partial spending data for April pointed to some weakening at the start of the second quarter. That suggests the full effect of higher energy prices may appear later in the year.
Separate trade data showed fuel imports rose by £1.8 billion in March. The increase was the third-largest monthly rise since records began in 1997. The figure showed Britain’s exposure to global energy markets.
The Bank of England held borrowing costs at 3.75% last month. However, policymakers signalled they were ready to act if price pressures continued. A Reuters poll showed economists expect rates to remain at 3.75% this year. Still, more than a third expect at least one rate hike as the energy shock lifts inflation forecasts.
Financial markets have priced in between two and three-quarter-point increases this year. Investors remain focused on whether higher oil prices will feed into wages and wider consumer prices.
Smith said the latest GDP data would not change much for the Bank of England. He said policymakers remain focused on the coming inflation spike and whether it spreads into pay growth.
The strong GDP figures gave Chancellor Rachel Reeves a chance to defend the government’s economic plan. She said the data showed the government was taking the right approach.
However, renewed political uncertainty in Westminster has added another risk. Investors are watching Prime Minister Keir Starmer’s position as pressure grows inside his party.
Capital Economics economist Ruth Gregory said the economy could record no growth in the second and third quarters. She also said prolonged political instability would add downside risk to the forecast.
The first-quarter figures showed resilience, but economists said the rest of the year may be harder. Higher energy prices, possible rate hikes, and weaker spending could slow activity after the strong start.
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