GDP figures beat forecasts, but markets see it as backward-looking amid energy and rate uncertainty
The UK economy expanded by a surprise 0.5% in February, the month before the Iran war began, according to the latest figures from the Office for National Statistics (ONS), well ahead of forecasts for 0.1%.
The ONS said services output rose by 0.5% on the month, while production was also up 0.5%. Construction increased by 1%, supporting the overall gain.
GDP grew 0.5% in the three months to February 2026. Services (+0.5%) and production (+1.2%) both increased, but construction (-2.0%) fell.
— Office for National Statistics (ONS) (@ONS) April 16, 2026
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January’s estimate was revised higher, with the ONS now reporting growth of 0.1% rather than a flat reading. The update suggests modest momentum into 2026 before February’s stronger result.
“Growth increased further in the three months to February led by broad-based increases across services,” Grant Fitzner (pictured right), chief economist at the Office for National Statistics, commented on the latest GDP figures.
“Within services, growth was driven by wholesaling, market research, hospitality, and publishing, which all performed well in the three months to February. Meanwhile, car production recovered from the effects of the autumn cyber incident.
“Growth in services and production was partially offset by another fall in construction, albeit at a slower rate than previously, with leasing and intellectual property licensing also continuing to contract.”
Earlier this week, the International Monetary Fund lowered its forecast for UK growth in 2026 to 0.8%, down from 1.3% previously. It has also said the UK could face a larger hit to growth than other major economies because it is a net importer of energy and therefore more exposed to oil and gas price shocks.
Expectations for Bank of England policy have shifted. Before the conflict escalated at the end of February, markets had increasingly anticipated rate cuts as inflation eased towards the 2% target. Since then, economists have placed greater weight on the risk that inflation remains higher for longer, which could delay any easing and, in some scenarios, require further tightening. The next UK inflation release is due on Wednesday.
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