UK growth defies forecasts amid Iran war; Reeves defends budget stance

What's happened

The UK economy has grown 0.3% in March and 0.6% in the first quarter, surprising economists as the Iran war continues to weigh on outlook. Chancellor Rachel Reeves has defended the government’s stance on economic stability, saying choices have strengthened the economy as political leadership questions persist.

What's behind the headline?

What this means now

• The economy has shown resilience in Q1, led by the services sector, with output up 0.6% for January–March.
• Analysts warn the gain is unlikely to be sustained as energy costs and supply-chain disruptions persist.
• Political uncertainty around Labour leadership could influence market expectations and borrowing costs.

Why this matters for readers

• Higher energy and borrowing costs may weigh on households and firms later in the year.
• The government’s fiscal stance is under scrutiny as it navigates the Iran conflict and domestic politics.

Forecasts

• Economists expect a weaker second quarter; growth may slow as front-loading wanes. Long-term impact will depend on global energy dynamics and policy responses.

How we got here

ONS data show services, manufacturing and construction contribute to quarterly growth; revisions to prior months point to a volatile start to 2026 amid geopolitical tensions and energy-price pressures.

Our analysis

The Independent reports that GDP grew 0.6% in Q1 with March up 0.3%, noting Reeves’ emphasis on economic stability. The Guardian frames Reeves’ comments in the context of leadership bids and gilt market expectations. The Mirror highlights political volatility alongside the GDP readings, including coverage of leadership‑related market reactions. All articles reference ONS data and expert commentary from ICAEW, CBI, and RSM.

Go deeper

• What does this mean for household budgets this year?
• How might leadership changes affect the economic plan?
• What sectors are most exposed to energy-price shifts?

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