UK economy performed better than expected in Q1 – GDP

Great Britain’s economy grew by 0.3% m/m in March, compared to downwardly revised 0.4% growth in February and beating expectations for a 0.1% contraction.

The same report showed that economy expanded by 0.6% in the first quarter, against 0.2% growth in the last three months of 2025.

Unexpectedly better than expected GDP numbers contribute to cautious optimism that the economy was in better shape as economists expected more negative impact from the escalation of the conflict in the Middle East.

The data showed strong growth in all three key sectors that contribute to gross domestic product – services (Mar 1.5% vs 0.9% f/c), manufacturing (Mar 1.2% vs 0.0% f/c) and construction (Mar 1.5% vs-0.5% f/c).

However, economists warn of rising recession and expect growth to slow or mildly contract in coming months, as full impact from the war is still to be seen, with high oil prices to spark a domino effect on the economy through rising inflation and higher borrowing cost.

Polls show the BoE will keep rates on hold at 3.75% this year, though many expect at least one rate hike as the Iran war fuels an energy price surge that drove up inflation forecasts.

On the other hand, financial markets have priced in between two and three 25 basis points rises this year.

Deepening political crisis in the UK that undermined the government and Prime Minister Starmer, is also expected contribute to fragile economic conditions.