UK economy grows 0.3% in March as Iran war's first effects appear

Europlaz Technologies reported price rises in polymers of about 5-10% since the war began, with some suppliers unable to confirm pricing until the point of transaction.

Ruth Gregory of Capital Economics warned the latest figures could be the year’s high point, with growth likely to weaken as stockpiling unwinds and households face higher energy costs, potentially leading to a mild recession.

Yael Selfin of KPMG said the Iran war’s impact would be more pronounced in the second quarter as energy and petrol costs weigh on disposable incomes and dampen demand.

Danni Hewson, head of financial analysis at AJ Bell, suggested some drivers may have been nudged toward buying an electric vehicle due to rising fuel costs.

Liberal Democrat Treasury spokesperson Daisy Cooper said the latest growth figure was 'already in the rear-view mirror' because of the war, accusing the government of infighting instead of tackling the cost of living.

Shadow chancellor Mel Stride said the chaos surrounding the Labour leadership was destabilising Britain's economy, noting higher borrowing costs as contenders promised more spending.

Chancellor Rachel Reeves said the growth figures showed the government had the 'right economic plan' but warned a Labour leadership contest risked plunging the country into chaos.

On the monthly basis, February was revised down from 0.5% to 0.4% and January from 0.1% to zero.

In the latest release, growth for the final three months of 2025 was revised up to 0.2% from 0.1%.

GDP for the first quarter of 2026 rose 0.6%, led by a rebound in retailing and construction; the quarterly growth was the fastest for a year and the highest among reported G7 economies so far.

The Office for National Statistics said the economy grew by 0.3% in March, defying forecasts of a contraction, with front-loaded consumption and investment amid war-related price pressures.

The IMF warned that the UK would see the hardest hit from the Iran war among advanced economies.

Siblings Kennady and Boston Mace described families limiting spending, with more visitors paying for activities but fewer purchases of food, reflecting tighter budgets.

The ONS reported retailers noted that motorists were stocking up on fuel as prices rose sharply, with some buyers possibly nudged toward electric vehicles due to higher fuel costs.

The ONS said there were signs that consumers and businesses brought forward spending in March due to fears over future price rises linked to the Iran war.