The UK economy experienced a surprising 0.5% growth in February, showing a significant increase compared to the 0.1% growth seen in both January and December, according to the Office for National Statistics.
The recent economic upturn, although promising for Chancellor Rachel Reeves and the Labour party, is now at risk due to the outbreak of the Iran war in late February. Economists, including Rob Wood from Pantheon Macroeconomics, were taken aback by the unexpected positive growth in February, which defied most forecasts of only a 0.1% increase.
However, a recent report from the International Monetary Fund (IMF) painted a gloomy picture for the UK economy, projecting a sharp downgrade in growth to 0.8% for 2026, down from the previously estimated 1.3% in January, the largest cut among G7 countries.
TUC General Secretary Paul Nowak expressed concern over the potential setbacks caused by the Iran war, particularly in light of rising costs driven by “Trumpflation.” He urged the government to take immediate action to shield the economy, proposing measures like a temporary gas price cap and expanded energy price support.
Reflecting on the February data, Barret Kupelian, PwC’s chief economist, noted the positive momentum in the UK economy but warned of potential disruptions from global geopolitical events.
In response to the economic developments, Chief Secretary to the Treasury James Murray emphasized the importance of a stable economic foundation for growth. He highlighted the government’s strategy to enhance stability, promote investment, and implement reforms to strengthen Britain’s resilience.
Shadow chancellor Sir Mel Stride acknowledged the growth but pointed out the IMF’s warning about the UK’s vulnerability to energy price shocks under Labour’s leadership.
The ONS reported a 0.5% GDP growth in the three months leading up to February, with services driving the expansion, while manufacturing faced a slight decline and construction rebounded. Grant Fitzner, ONS chief economist, attributed the growth to positive performances in wholesaling, market research, hospitality, and publishing sectors, with car production recovering from previous setbacks.