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The UK economy experienced unexpected growth in March, despite the onset of the Iran war beginning to impact the economic landscape. The Office for National Statistics (ONS) reported an increase of 0.3% in economic activity that month, defying predictions that anticipated a slight contraction. However, experts expect the conflict’s full economic consequences to become more evident later in the year.
According to the ONS, both consumers and businesses appeared to accelerate their spending in March, likely anticipating future price hikes driven by the war. Specific sectors such as retail and construction contributed notably to the overall growth, which reached 0.6% in the first quarter of 2026—the fastest quarterly rise in a year and the highest among the G7 nations that have reported thus far. The International Monetary Fund had earlier warned that the UK would face one of the most significant economic shocks due to the conflict compared to other advanced economies.
The impact of the war was particularly noticeable in areas such as car sales and fuel purchases. Retailers reported an increase in motorists stocking up on fuel amid rising prices. Danni Hewson, head of financial analysis at AJ Bell, suggested that higher fuel costs may have encouraged some drivers to consider switching to electric vehicles. At the same time, KPMG’s chief economist, Yael Selfin, predicted that the economic strain from energy, petrol, and food price increases—exacerbated by disruptions to fertilizer supplies—would pose a growing challenge for households and businesses in the second quarter.
The challenges faced by businesses were echoed by local entrepreneurs such as siblings Boston and Kennady Mace, who operate a play centre in Chelmsford, Essex. They have observed that families are now limiting their spending, with visitors increasingly opting out of purchasing food alongside activities because of tighter budgets. Boston noted that, despite overcoming difficulties like the pandemic and past disasters, this current financial period has been the toughest in their thirteen years in business. Meanwhile, Chancellor Rachel Reeves highlighted the economy’s ongoing growth and promised to introduce further support for those affected by the war, while cautioning against political instability that could jeopardize economic progress. Critics from opposition parties have also pointed to the political turmoil as a risk factor for economic stability amid rising borrowing costs and ongoing government infighting
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