UK economic growth in February better than forecast before Iran war
The UK economy grew at its fastest pace for more than two years in February in a better-than-expected start to 2026, official figures have shown.
The Office for National Statistics (ONS) said gross domestic product (GDP) grew by 0.5% month-on-month in February – the fastest expansion since January 2024 – following upwardly revised growth of 0.1% in January.
Most economists had forecast GDP to rise by just 0.1% in February, while the ONS had previously estimated no growth in January.
But the figures come amid forecasts that Britain’s output will be hardest hit this year by the fallout from the Iran war and soaring energy costs.
A stark economic outlook report from the International Monetary Fund (IMF) earlier this week showed the UK facing the biggest downgrade to growth among the G7 group of countries, with 0.8% forecast for 2026, down sharply from the 1.3% predicted in January.
James Murray, Chief Secretary to the Treasury, said: “Growth only happens when the economy is on solid ground.”
“At the IMF meetings in Washington, the Chancellor has set out how we will go further and faster to boost Britain’s competitiveness and build a stronger, more resilient economy, keeping costs down for families and businesses and taking back control of our energy costs as today we cut bills by up to 25% for 10,000 British businesses,” he added.
Shadow chancellor Sir Mel Stride said: “Any economic growth is welcome, but the IMF were clear this week that under Labour our economy is totally unprepared for the recent energy shock.”
The ONS said in the three months to February, GDP rose by 0.5% following growth of 0.3% in the three months to January, revised up from the previous estimation of 0.2%.
However, the ONS revised its figure for the three months to December 2025 down to zero growth.
Grant Fitzner, chief economist at the ONS, said growth in February was “led by broad-based increases across services”.
Services output grew by 0.5% month-on-month in February, while manufacturing activity contracted by 0.1% and construction saw a 1% rebound.
Mr Fitzner said: “Within services, growth was driven by wholesaling, market research, hospitality and publishing, which all performed well in the three months to February.
“Meanwhile, car production recovered from the effects of the autumn cyber incident.”
Experts said the figures showed the economy getting back on is feet after the autumn budget uncertainty at the end of 2025 that held back activity.
But PwC chief economist Barret Kupelian said “geopolitics may yet kick the chair away”.
He said: “Price pressures and supply constraints are already beginning to bite in parts of the economy exposed to energy-intensive commodities and downstream products.
“In the short term, firms can absorb some of that strain by paying more.
“But the longer the crisis lasts, the greater the risk that higher costs feed through into prices, margins and, ultimately, growth itself.”
Thomas Pugh, chief economist at RSM UK, said the Bank of England was likely to hold interest rates later this month until the impact of the Iran war becomes clearer.
“Stronger growth makes it more likely that the Bank of England will raise rates at some point this year, but given heightened uncertainty, we think a hold at the April Monetary Policy Committee meeting is still the most likely outcome,” he said.
Published: by Radio NewsHub