UK economy grew 0.5% before Iran war impact
The UK economy grew more than expected in February, showing signs of recovery before the conflict in the Middle East affected global conditions.
Official data shows that the UK’s GDP increased by 0.5% in February. This was higher than the 0.1% growth that economists had predicted. It suggests that the economy was starting to gain strength before the Iran-related conflict created new challenges.
The figures were released by the Office for National Statistics (ONS). They also revised January’s performance slightly upward, from no growth to a small increase of 0.1%. This means the economy had already started improving before February.
The ONS said the February growth was mainly driven by strong performance in the services sector and manufacturing. Both sectors grew by 0.5% during the month. In addition, the construction sector showed a strong recovery, growing by 1%.
Looking at a longer period gives a clearer picture of the economy. In the three months leading up to February, the UK economy grew by 0.5%. This was higher than the 0.3% growth recorded in the three months to January. This steady improvement suggests that the economy was building momentum before global tensions increased.
Grant Fitzner, the chief economist at the ONS, said that growth improved during this period due to strong performance across many parts of the services sector. He explained that industries such as wholesaling, market research, hospitality, and publishing all performed well.
He also noted that the recovery of Jaguar Land Rover helped support economic growth. The company had faced a major cyber-attack the previous autumn, which stopped production for several weeks. Its return to normal operations contributed to the improved figures.
However, despite the positive data for February, the outlook for the UK economy has become more uncertain. Economists have lowered their forecasts for growth in 2026 due to rising energy prices and global instability.
One of the main concerns is the increase in oil and gas prices. These prices have risen sharply due to disruptions linked to the conflict, including the effective closure of the Strait of Hormuz. This has made energy more expensive worldwide, which can slow economic activity.
Surveys show that both business and consumer confidence have dropped significantly. Many companies are worried about higher costs and weaker demand. At the same time, consumers are becoming more cautious with their spending due to rising living costs.
Investors are also concerned about inflation. Higher energy prices can lead to increased costs across the economy. To control inflation, interest rates may need to rise, which could slow down economic growth further.
Martin Beck, chief economist at WPI Strategy, warned that February’s strong growth might not last. He said it could turn out to be “the calm before the storm.” According to him, the effects of the Middle East conflict could reduce overall economic growth in the first quarter of the year.
He pointed out that energy prices rose sharply in March, along with increased global uncertainty. These factors are likely to put pressure on the economy in the coming months.
Suren Thiru, chief economist at the ICAEW, also expects weaker performance after February. He said March was likely a much more difficult month, with high fuel prices and supply chain disruptions caused by the conflict. These issues may have slowed down economic activity.
However, he added that some sectors, such as retail, may have received a small boost from early Easter spending.
Meanwhile, UK Chancellor Rachel Reeves is attending the International Monetary Fund’s spring meetings in Washington. She has expressed concern about the economic impact of the conflict, calling it a “mistake” and highlighting its risks to global stability.
Responding to the latest GDP data, Chief Secretary to the Treasury James Murray said that economic growth depends on stability. He said the government’s plan focuses on restoring stability, encouraging investment, and delivering reforms to build a stronger and more resilient economy.
On the other hand, Shadow Chancellor Mel Stride criticized the government’s preparedness. He said that although growth is positive, the UK economy is not ready to deal with the recent energy shock, as highlighted by the IMF.
The stronger-than-expected growth before the conflict may also create challenges for the Bank of England. Policymakers are concerned that rising energy prices could lead to higher inflation across the economy.
Before the conflict began, many investors expected interest rates to fall, as inflation was predicted to return to the Bank’s 2% target in the spring. However, the situation has now changed.
Due to rising energy costs, markets are now expecting at least one interest rate increase this year. Higher rates are used to control inflation, but they can also slow down economic growth.
The Bank of England’s Monetary Policy Committee will meet again at the end of the month to decide on interest rates. Governor Andrew Bailey said that the situation is very uncertain and requires careful decisions.
He explained that the Bank will not rush into any decisions because there are many unknown factors. These include how the conflict will develop and how it will affect the UK economy over time.
A clearer picture of inflation will come soon. Official data for March inflation is expected to be released next Wednesday. This will show how much prices have been affected by the recent rise in energy costs.
In summary, the UK economy showed strong growth in February, indicating a possible recovery. However, the conflict in the Middle East and rising energy prices have created new risks. The coming months will be important in determining whether the UK can maintain its economic progress or face a slowdown.
