UK economy grew by more than expected in first month of Iran war

The UK economy expanded by 0.6% in the first three months of 2026, exceeding forecasts and defying expectations of contraction following the outbreak of the Iran war. Growth was primarily fueled by a 0.8% rise in the services sector, particularly wholesale and retail trade, while March alone saw a 0.3% increase—higher than anticipated. Analysts had predicted a decline after the war’s start, but services output grew by 0.3% and total production by 1.5%, offsetting a 0.2% drop in manufacturing. Chancellor Rachel Reeves framed the data as proof of her government’s economic strategy but cautioned that a looming leadership contest could destabilize recovery efforts. Opposition shadow chancellor Mel Stride countered that political uncertainty was already undermining economic stability. Economists noted underlying resilience in household spending early in the year, though they warned the growth trend may not persist. The Office for National Statistics reported the figures, highlighting robust performance in Q1 2026 despite geopolitical tensions. Reeves’ comments came amid speculation of an imminent leadership challenge, adding to market concerns over policy continuity.