The UK economy expanded by 0.6 per cent in the first quarter of 2026, according to the Office for National Statistics, though the final growth figure for 2025 was revised slightly downward to 1.3 per cent from the previously reported 1.4 per cent.
Stronger-than-Expected Growth in Early 2026
The ONS confirmed on Tuesday that GDP climbed by 0.6 per cent in the first quarter, a faster rate than many analysts had anticipated. Real GDP per head also rose by 0.6 per cent during the period.
Businesses rushed to build up stockpiles and activity surged as tensions in Venezuela and the Middle East intensified, according to official figures. However, the UK economy contracted by 0.1 per cent in April, the second month of the Iran war, the ONS confirmed earlier this month.
Mixed News for Chancellor Reeves
The data may prove bittersweet for Chancellor Rachel Reeves, who is expected to be removed from her post as Andy Burnham takes over as Prime Minister in mid-July, despite having presided over a period of economic expansion, as reported by City AM.
Liz McKeown, director of economic statistics at the ONS, said: "Services were the main driver of growth in the latest quarter, with strengths in computer programming, wholesale and advertising only offset by falls in rental companies and recruitment agencies."
Business Investment and Trade Deficit
While the ONS recorded overall growth of 0.6 per cent, business investment reached approximately 0.9 per cent in the first quarter, slightly ahead of expectations. The current account deficit deteriorated further, with the balance falling to –£22.2bn.
City economists have cautioned that international trade disruption stemming from the Iran war could knock up to around 0.3 percentage points off UK economic growth, while inflation could remain above three per cent for the remainder of the year.
Incoming PM Burnham Faces Challenges
This leaves incoming Prime Minister Burnham facing a challenging in-tray, despite a broad promise to oversee the biggest transformation of British politics in a lifetime. Speaking on Monday, Burnham outlined plans to raise living standards through a 10-year programme centred on devolution, "greater" public control of utilities and "social value" reforms to areas such as public procurement.
The former Greater Manchester mayor pledged to deliver "good growth" that would be felt across all regions of the country. He indicated he would overhaul business rates to bolster high streets and pubs, while also seeking to "reindustralise" communities that have witnessed factory closures.
Industry Reaction and Concerns
Industry bodies broadly welcomed Burnham's push for stronger growth and closer collaboration with the private sector, with TheCityUK's Miles Celic describing devolution as "vital" for businesses. However, some analysts cautioned that the landmark speech fell short of offering concrete policy detail.
Mark Smith, a managing director at professional services firm Ayming UK, raised concerns over corporation taxes and the government's industrial strategy. Smith said: "If Andy Burnham does become Prime Minister, he needs to set out a clear plan for business early on and, importantly, stick to it. Since Labour came to power, we've seen too many U-turns and too much speculation around key policy areas. That makes it incredibly difficult for businesses to plan ahead and commit to long-term investment."
