(Sharecast News) - The British economy expanded in the first quarter, official data showed on Thursday, despite the outbreak of war in the Middle East.
According to the Office for National Statistics, GDP increased by 0.6% in January to March, in line with consensus, following a revised 0.2% uplift in the fourth quarter.

The main growth driver was the dominant services sector, which expanded by 0.8%. The ONS said wholesale, computer programming and advertising performed particularly well.

The construction sector returned to growth during the quarter, with a 0.4% uplift, while production expanded slightly, by 0.2%.

On a monthly basis, GDP grew by 0.3% in March following downwardly-revised growth of 0.4% in February. Driving March's above-forecast growth was the construction sector, which soared 1.5%, boosted by increases in both new work and repair and maintenance.

Analysts had expected GDP to shrink by 0.2% in March, following the outbreak of war in the Middle East at the end of February. The conflict has sent global energy prices soaring, reigniting inflation fears and weighing on interest rate expectations.

GDP per capita, which divides GDP by the total UK population to give a proxy indicator of living standards, rose 0.6% in the first quarter, and is up 0.9% year-on-year.

Ben Jones, senior lead economist at the Confederation of British Industry, said: "The rebound in GDP growth in the first quarter looks unusually strong, largely reflecting February's outsized gain.

"This pace of growth is unlikely to be sustained, particularly as the effects of the Iran conflict begin to be felt. With higher fuel and energy costs feeding through and disruption to global supply chains set to intensify the longer the Strait of Hormuz remains closes, pressures on businesses will mount, creating headwinds that are likely to weigh on growth through the remainder of 2026."

Derren Nathan, head of equity research at Hargreaves Lansdown, said the data was "the strongest print out of the G7 nations so far, with only Japan left to report - consensus is for 0.4%.

"Stronger-than-expected growth is usually a win for Downing Street in terms of tax revenues. But the period captures just one month of the Iran conflict and higher oil prices, and growth is expected to slow this quarter."

James Smith, developed markets economist, UK, at ING, said: "Since 2022, UK growth figures have come in much stronger in the first three months of the year than the rest. Growth has averaged 0.6% in Q1 over that period, a sharp contrast to Q3, where the economy has typically flatlined.

"2026 looks like it'll be no different.

"It's hard to say exactly what's happening. But it seems that something's not quite right with the way the data is being seasonally adjusted, a legacy we suspect of higher inflation and the timing of annual price hikes."

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