UK economic system smashes forecasts with 0.5% development in February
Newsflash: The UK economic system was rising a lot sooner than anticipated earlier than the Iran struggle jolted international exercise.
UK GDP rose by 0.5% in February, new knowledge from the Workplace for Nationwide Statistics reveals. That’s a lot stronger than the 0.1% development the Metropolis had anticipated.
The ONS reviews that providers and manufacturing each grew by 0.5%, and development grew by 1.0% in February.
January’s GDP knowledge has been revised up too – to point out 0.1% development, somewhat than stagnation.
In regular occasions can be a big increase to Rachel Reeves.
Nonetheless, this knowledge is considerably historic, because the Center East battle is reshaping the prospects for the worldwide economic system this yr, driving up power and gas costs, and borrowing prices, and hurting confidence.
Earlier this week the IMF minimize its forecast for UK development in 2026 to 0.8%, down from 1.3%.
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Up to date at 02.18 EDT
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Capital Economics: development my now sluggish to a crawl
The UK’s “bumper development in February” has most likely already been largely extinguished by the Center East disaster, warns Capital Economics.
Ruth Gregory, deputy chief UK economist at Capital Economics, says:
double citation markGDP rose by a bumper 0.5% m/m in February however March’s exercise PMIs counsel the struggle in Iran has already all-but extinguished development. And in our baseline situation we predict GDP development will sluggish from 1.4% in 2025, maybe to simply 0.7% this yr.
Gregory fears development will “sluggish to a crawl within the coming quarters”, saying:
double citation markThe stronger February outturn than we anticipated most likely meant that GDP grew by 0.6% q/q or so in Q1, somewhat than 0.3% q/q as we beforehand thought. However the leap in power costs means there may be unlikely to be a lot development after that.
[PMIs are a survey of purchasing managers, which showed the biggest jump in costs since 1992 last month]
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Anna Leach, chief economist on the Institute of Administrators, warns that the UK is ‘uniquely weak’ to the power shock:
double citation mark“Revisions to GDP present that, forward of the battle within the Center East, the economic system was selecting up from a dip in exercise final summer time. Nonetheless, because the battle drags on, reviews proceed to develop of escalating power prices, paused choice making and issues over potential shortages of essential inputs.
The UK’s tight financing circumstances, excessive preliminary place to begin for inflation, uncompetitive power prices and low fiscal house, make us uniquely weak to the state of affairs.
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JP Morgan: oil worth spike might imply the UK economic system’s return to development is short-lived
Scott Gardner, funding strategist at J.P. Morgan Private Investing fears the UK’s development pick-up could not final, as a result of Iran struggle.
double citation mark“The UK economic system beat expectations in February, displaying robust development in the course of the month earlier than the struggle with Iran broke out. Whereas it is a optimistic studying, the unsure state of affairs within the Center East and ensuing spike in oil costs might imply this return to development is short-lived.
“In February, industrial manufacturing and providers rose sharply. The rise was partly offset by manufacturing exercise contracting. Retail gross sales fell after a stronger than anticipated January whereas the property market stays subdued.
“Wanting forward, the battle within the Center East and escalation within the Strait of Hormuz has dented the expansion outlook for the UK economic system. Oil costs had already been rising in latest months, however the newest spike may very well be particularly painful for companies and shoppers by way of greater prices and elevated rates of interest.
The extent to which the battle hits UK development this yr will hinge on the period of the disruption within the Strait of Hormuz and persistence of the oil worth shock, Gardner provides.
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February’s development reveals UK most likely on “a stronger footing” than anticipated earlier than power shock
February’s GDP report reveals “the calm earlier than the storm” that’s now hitting the UK economic system from the Center East, reviews Sanjay Raja, Deutsche Financial institution’s chief economist.
Raja says February GDP “smashed expectations” by coming in at “a thumping 0.5%” month-on-month.
He says it reveals forecasters had been too pessimistic about UK development firstly of the yr, and predicts we’ll see respectable development of as much as 0.6% within the first quarter of this yr.
double citation markOur nowcast fashions now present Q1-26 GDP development returning again to our authentic forecast from the beginning of the yr: 0.5-0.6% q/q, reflecting some optimistic payback after a really sluggish second half in 2025. Given as we speak’s knowledge, spending seems stronger than anticipated. And corporations may additionally be investing greater than we thought heading into the Iran battle.
However the influence of upper power costs, and weaker enterprise funding, will damage development this yr, he provides:
double citation markThe excellent news is that the UK probably entered the power shock on a stronger footing than many anticipated. Q1-26 GDP development will probably hit greater than double the quarterly price many forecasters anticipated, additionally lifting annual GDP development projections. The dangerous information is that upward GDP momentum gained’t final. This may probably be the expansion earlier than the power squeeze.
Households can have already began to really feel the influence of the Iran power shock, impacting disposable incomes and discretionary spending. Pump costs are up over 20% for the reason that oil shock occurred. And twin gas payments are because of rise by an analogous quantity over the summer time. Companies will even probably be pulling again funding plans, hiring plans, and reducing wage development in consequence. As such, anticipate extra sluggish development into Q2-26 (and past).”
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Up to date at 02.55 EDT
Moody’s: upturn prone to be brief lived
The UK’s development acceleration in February is prone to be “short-lived”, as a result of Iran struggle, warns Andrew Hunter, affiliate director and senior economist at Moody’s Analytics:
double citation mark“The 0.5% month-over-month leap in U.Okay. GDP in February, and slight upward revision to January’s knowledge, echoes the sooner enchancment within the surveys and suggests the economic system had extra momentum firstly of this yr than beforehand thought.
Nonetheless, with these surveys weakening fairly sharply in March because the Center East battle despatched power costs hovering, this upturn is prone to show brief lived.
The hit to family actual incomes and renewed blow to confidence is prone to hold financial development subdued over the approaching months and we now have lowered our development forecasts for this yr in our April baseline.”
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Britain’s development sector had a risky winter, primarily because of a drop in exercise in December.
Month-to-month development output is estimated to have elevated by 1.0% in February, twice as quick because the 0.5% growt recorded in January.
However in December, exercise fell by 1.3% – because of a drop in new work.
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UK manufacturing output development was primarily pushed by development in mining and quarrying (up 3.9%), and electrical energy, gasoline, steam, and air-con provide (up 1.5%).
Water provide; sewerage, waste administration, and remediation actions additionally grew in February 2026 (up 0.2%).
However there was a 0.1% fall in manufacturing output – because of a drop in manufacture of transport tools (though this did development strongly within the December-February quarter).
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How the providers sector helped UK economic system to smash forecasts
“Widespread development” throughout the UK providers sector helped the economic system to increase strongly in February, by a powerful 0.5%.
Right this moment’s GDP report reveals that 12 of the 14 subsectors of the providers economic system grew in the course of the month, serving to providers to develop by 0.5%.
“Administrative and help service actions” made the biggest contribution (up 2.0%), because of a pickup in hiring exercise.
The second largest optimistic contribution got here from wholesale and retail commerce; restore of motor automobiles and bikes (up 0.7%).
Skilled, scientific, and technical actions additionally contributed to the expansion, with an increase of 0.8% in February 2026.
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Up to date at 02.21 EDT
Chart: How UK development was accelerating earlier than Center East battle
Illustration: ONSShare
ONS: Development elevated additional within the three months to February
The UK economic system additionally grew by 0.5% within the three months to February, helped by the tip of the cyber-attack disruption at Jaguar Land Rover final autumn.
That’s up from 0.3% development within the three months to January.
ONS chief economist Grant Fitzner says:
double citation mark“Development elevated additional within the three months to February led by broad-based will increase throughout providers.
“Inside providers, development was pushed by wholesaling, market analysis, hospitality, and publishing, which all carried out effectively within the three months to February. In the meantime automotive manufacturing recovered from the consequences of the autumn cyber incident.
“Development in providers and manufacturing was partially offset by one other fall in development, albeit at a slower price than beforehand, with leasing and mental property licencing additionally persevering with to contract.”
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UK economic system smashes forecasts with 0.5% development in February
Newsflash: The UK economic system was rising a lot sooner than anticipated earlier than the Iran struggle jolted international exercise.
UK GDP rose by 0.5% in February, new knowledge from the Workplace for Nationwide Statistics reveals. That’s a lot stronger than the 0.1% development the Metropolis had anticipated.
The ONS reviews that providers and manufacturing each grew by 0.5%, and development grew by 1.0% in February.
January’s GDP knowledge has been revised up too – to point out 0.1% development, somewhat than stagnation.
In regular occasions can be a big increase to Rachel Reeves.
Nonetheless, this knowledge is considerably historic, because the Center East battle is reshaping the prospects for the worldwide economic system this yr, driving up power and gas costs, and borrowing prices, and hurting confidence.
Earlier this week the IMF minimize its forecast for UK development in 2026 to 0.8%, down from 1.3%.
Share
Up to date at 02.18 EDT
China’s economic system beats forecast in first quarter
Financial development in China has accelerated within the final quarter, in an encouraging begin to the yr for Beijing.
China’s gross home product (GDP) grew by 5%, yr on yr, within the first quarter of 2026, knowledge from the Nationwide Bureau of Statistics (NBS) launched as we speak reveals.
That’s 0.5 proportion factors sooner than within the fourth quarter of 2025,
The NBS says “The nationwide economic system obtained off to a great begin”, explaining:
double citation mark“The expansion of manufacturing and provide accelerated, market demand continued to enhance, employment was typically steady, market costs picked up reasonably, and high-quality growth superior with new and optimistic momentum.”
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Reeves provides extra power invoice help to companies as Iran struggle pushes up prices
Richard Partington
Rachel Reeves has introduced an growth of help for probably the most energy-intensive UK companies, as they face hovering payments on account of the Center East battle.
The chancellor mentioned the long-promised British Industrial Competitiveness Scheme (BICS) can be expanded to cowl 10,000 corporations, up from the 7,000 initially introduced.
The scheme, which the federal government says will minimize corporations’ payments by as much as 25%, is not going to come into operation till subsequent yr, though in a big concession Reeves mentioned help would then be backdated to this month.
The announcement was welcomed by enterprise teams, however some criticised the very fact the cash wouldn’t arrive till subsequent April, urging Reeves to carry help ahead as they face a looming disaster on account of the continuing closure of the strait of Hormuz.
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Introduction: UK February GDP report developing
Good morning, and welcome to our rolling protection of enterprise, the monetary markets and the world economic system.
Financial knowledge inevitably has a shelf life, earlier than it’s overtaken by new numbers. Nevertheless it’s uncommon to be outdated even earlier than it’s launched!
That’s the state of affairs with the UK’s February GDP report, because of be launched at 7am this morning.
It’s anticipated to point out some modest development throughout the economic system, with GDP forecast to have risen by 0.1% (in accordance with the Metropolis consensus). Forecasts vary from 0% to 0.3% development.
However the battle within the Center East, which started on the finish of February, means the UK economic system is already in a brand new world – of upper power costs, meals inflation fears, provide chain disruptions, and geopolitical tensions.
The economic system stalled in January, with no development recorded (though this may very well be revised as we speak). That, Deutche Financial institution’s Sanjay Raja says, was a “disillusioned”, including:
double citation markWith the economic system stagnating to begin the yr, we anticipate a rebound in February. We don’t low cost an upward revision to January GDP both. Our nowcast fashions level to each a possible upward revision to January and a few additional upward momentum in February.
What can we see for February GDP? We see GDP increasing by 0.2% m-o-m, lifted by broad-based momentum throughout the providers, manufacturing and development sectors.
The GDP knowledge comes as chancellor Rachel Reeves continues to attend the IMF and World Financial institution’s spring assembly in Washington DC, the place she yesterday described the Iran struggle as a “mistake” that has destabilised the worldwide economic system.
The agenda
7am BST: UK GDP report for February 7am
10am BST: Eurozone inflation report for March
1.30pm BST: US weekly jobless
5pm BST: IMF holds debate on the worldwide economic system
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