LONDON — The United Kingdom’s economy expanded by 0.4 percent in March, official data showed Wednesday, a result that surpassed analyst expectations and offered the government an unexpected boost amid growing concern about the global economic fallout from the armed conflict in Iran. The Office for National Statistics said the growth reading, which lifted first-quarter gross domestic product to 0.6 percent — the strongest quarterly performance since early 2024 — was driven largely by a rebound in the services sector and a late surge in manufacturing output ahead of anticipated supply chain disruptions tied to Middle East shipping routes.
The figures arrived at a delicate moment. The conflict that erupted between Iran and a coalition of Gulf states in February, drawing in Western military support in a limited advisory capacity, has roiled energy markets and prompted insurers to attach significant war-risk premiums to tanker traffic transiting the Strait of Hormuz. Brent crude oil has traded between $94 and $107 per barrel since hostilities began, compared with an average of $78 in the final quarter of 2025, adding to household energy costs and squeezing the margins of energy-intensive manufacturers. Economists had widely expected those headwinds to weigh on March output, making the surprise expansion all the more notable.
Chancellor of the Exchequer Helena Ashworth described the figures as a sign of the economy’s fundamental resilience. “British businesses and workers have navigated extraordinary uncertainty with extraordinary determination,” she said in a statement released shortly after the ONS publication. “These numbers are not a reason for complacency, but they demonstrate that the foundations we have been building — stability, investment, skills — are holding.” Opposition politicians pushed back, arguing that the March bounce reflected a pre-conflict stockpiling effect rather than genuine underlying momentum and that the full impact of the Iran conflict would not be visible in the data until April and May releases.
Independent economists largely agreed that the true test would come in the months ahead. “March is essentially a snapshot taken before the worst of the disruption had fed through,” said Dr. Olivia Travers, chief economist at the Hastings Institute for Economic Research. “Companies were building inventory, front-loading imports, and accelerating project timelines because they saw the uncertainty coming. That kind of activity flatters the near-term numbers but often represents borrowing growth from future quarters.” She said her central forecast remained for GDP to slow to 0.2 to 0.3 percent growth in the second quarter, with downside risks dependent on how quickly diplomatic channels moved toward a ceasefire. Energy analysts have estimated that a protracted conflict lasting beyond September could add a further 0.3 percentage points to UK headline inflation by the end of the year.
The services sector, which accounts for roughly 80 percent of the UK economy, expanded 0.5 percent in March, with particularly strong performances in professional and business services, information technology, and financial intermediation. The latter benefited partly from increased trading volumes in commodity derivatives as energy market volatility drove hedging activity. Construction output rose 0.3 percent, supported by a pipeline of public infrastructure projects, though housing starts fell for the sixth consecutive month as higher mortgage rates continued to weigh on private residential development. The manufacturing sector contracted slightly in March on a revised basis, but strong export orders placed earlier in the quarter and fulfilled in the month partially offset the decline.
The Bank of England said it was monitoring the situation carefully and that its Monetary Policy Committee would review both the growth data and updated energy price projections at its June meeting. Market pricing ahead of the release had suggested only a 30 percent probability of a rate cut in June; that probability ticked up modestly to 38 percent in the immediate aftermath of the GDP publication before settling back as traders absorbed the conflicting signals from a resilient real economy set against stubborn services inflation. For households and businesses watching the Iran conflict unfold on their screens while tracking their energy bills, the surprise growth figure offered a measure of reassurance — though most economists were careful to note that the picture a month from now could look very different.
The government is expected to release an updated economic assessment in late May, incorporating revised energy price assumptions and an initial estimate of the trade impact from rerouted shipping. Officials have said they remain in close contact with international partners about contingency measures, including potential releases from strategic oil reserves, should energy prices move significantly higher. For now, the March number gives the Chancellor a talking point — and a brief political respite — in what promises to be a turbulent spring.