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Surprise expansion in March
The UK economy expanded by 0.3% in March, surpassing analyst predictions of a slight contraction, despite early impacts from the Iran conflict, official data revealed.
Front-loaded spending drives growth
The Office for National Statistics (ONS) attributed the unexpected growth to consumers and businesses accelerating purchases in March, anticipating price hikes linked to the war. This trend, known as front-loading, particularly boosted retail and construction sectors.
Quarterly growth reached 0.6% in the first three months of 2026-the fastest pace in a year and the strongest among G7 nations reporting so far. However, the International Monetary Fund (IMF) previously warned the UK would face the harshest economic impact from the conflict among advanced economies.
Businesses and households brace for impact
Retailers reported motorists stockpiling fuel as prices surged, while car dealers noted increased interest in electric vehicles (EVs) due to rising petrol costs. Danni Hewson, head of financial analysis at AJ Bell, suggested the price hikes may have prompted some drivers to switch to EVs sooner than planned.
"Households are under renewed pressure as energy and petrol prices climb. Food costs are also expected to rise, with disruptions to fertilisers and other essential inputs," said Yael Selfin, chief economist at KPMG.
Yael Selfin, KPMG
Selfin warned these increases would squeeze disposable incomes, dampening demand and posing challenges to economic activity in the coming months.
Small businesses feel the strain
Kennady and Boston Mace, who run a play centre in Chelmsford, Essex, described the current period as the toughest in their 13-year history. Families are cutting back on spending, opting for activities without food to save money.
"Everything's going up... we've got a limit on what we can charge so the profit margin is getting smaller and smaller," Boston Mace said.
Boston Mace, Play Centre Owner
Europlaz Technologies, a medical device manufacturer in Essex, faced immediate price increases of 5-10% for polymers-a critical material-following the war's outbreak. Rory O'Keeffe, the firm's commercial director, said some suppliers now refuse to confirm prices until transactions are finalised, complicating business planning.
Political reactions and economic outlook
Chancellor Rachel Reeves credited the government's "right economic plan" for the growth but cautioned that Labour leadership turmoil risked destabilising the economy. She is set to announce additional support for families and businesses affected by the war next week.
Shadow Chancellor Mel Stride blamed Labour's internal divisions for rising borrowing costs, which hit a 30-year high this week. Liberal Democrat Treasury spokesperson Daisy Cooper MP argued the growth figures were already outdated due to the war's impact.
"Instead of tackling the cost of living, the government is consumed by infighting," Cooper said.
Daisy Cooper MP, Liberal Democrats
Ruth Gregory, deputy chief UK economist at Capital Economics, warned the March figures likely marked the "high point for the year." She predicted growth would weaken from May as stockpiling effects fade and energy price pressures intensify, potentially triggering a mild recession.
Revisions and uncertainties
The ONS revised earlier GDP estimates, upgrading Q4 2025 growth to 0.2% from 0.1%. However, February's growth was downgraded to 0.4% from 0.5%, and January's to zero from 0.1%. These adjustments highlight the volatility of economic data amid ongoing global uncertainties.
