February’s stronger-than-expected GDP figures released earlier today have pointed to a more resilient start to the year for the UK economy than many had anticipated. The Office for National Statistics (ONS) said the economy grew by a faster-than-expected 0.5%, while it revised its estimate for January up to 0.1% after previously saying the start of the year had seen no growth.Growth in the economy was driven by solid performances in the services and production sectors. January’s GDP reading was also revised higher.
Albeit, these data relate to the period before the start of the Iran conflict.
The figures suggest momentum was building at the start of 2026, offering a more encouraging picture after a softer end to last year and raising hopes that parts of the economy were beginning to regain their footing.
However, the more upbeat data was tempered by continued weakness in construction, while uncertainty around geopolitical tensions, rising energy prices and the outlook for interest rates continues to cast a shadow over business confidence, consumer spending and the strength of the recovery.
Industry professionals are reacting to the latest GDP figures below:
Danni Hewson, AJ Bell head of financial analysis, comments:
“It feels almost cruel that the UK economy had managed to find a higher gear in February and grew faster than had been thought in the opening days of 2026.
“After a disappointing end to 2025 – which was one of the factors in the IMF’s calculations suggesting the UK economy will take the biggest hit of G7 countries because of the Iran war – the start of this year had looked surprisingly buoyant. The hugely important service sector was responsible for much of the momentum, with the jobs market showing tentative signs of recovery as businesses brushed off the impact of increased labour costs.
“Big ticket purchases were back on the table with car sales notably higher, people were already booking their summer holidays, and accountants and bookkeepers saw a spike in workload as businesses prepared for the huge change of Making Tax Digital which went live at the start of April.
“The bounce back from last year’s cyber-attack on Jaguar Land Rover was continuing to power the production sector as the supply chain raced to take advantage of pent-up demand.
“But it wasn’t all good news, with construction still stuck in the doldrums as housebuilders continued to display an abundance of caution. This will have only been exacerbated by the situation in the Middle East, which has altered the expected path of interest rates.
“Whilst the governor of the Bank of England has made it clear he understands the tightrope the MPC must walk over the coming months if it’s to prevent inflation from becoming embedded in the UK economy, many would-be house buyers have had the rug pulled out from under their feet.
“They had been anticipating further falls in interest rates this year, potentially waiting for that sweet spot where lenders fought to offer the lowest mortgage rates to make that dream home a touch more affordable. Now the outlook for the housing market is threatened by billowing dark clouds, the same storm that will make companies think twice about new investment and new hires as consumers once again struggle to tighten their belts.
“February’s growth does highlight the resilience of the UK economy, but the picture painted by these figures might as well be used to wrap up today’s chippy tea.”
Luke Bartholomew, Deputy Chief Economist, at Aberdeen said;
“The UK economy grew much faster than expected in February after a period of very sluggish growth. While it is no doubt of some interest that the stronger survey data from earlier this year did indeed translate into stronger hard data, ultimately this report feels very dated given all that has happened since February. As the IMF recently pointed out, the UK economy was very exposed to the shock from the Iran war as a large energy importer with weakly anchored inflation expectations and an already very soft labour market. So next week’s inflation and employment data will provide an important early sign of how this shock is playing out, and have much more influence on the path of interest rates than this report. But with energy markets having stabilised recently, we think the Bank of England is unlikely to hike interest rates in the near term.”
Lindsay James, investment strategist at Quilter:
“The UK economy has bounced back somewhat as it continues its fragile start to 2026, with growth coming in at 0.5% for February, a recent high amidst stalling figures. Given this will only have taken into account the first days of the US-Iran conflict, the true fallout, however, is yet to be felt, but nevertheless this will be a welcome relief to the Labour government. Growth has also been revised up to 0.3% in January too, suggesting that a recovery in the UK economy was underway prior to events in Iran kicking off at the end of February. 2026 was the year the government was hoping to build on following a challenging first 18 months in power, but all that work may have just been undone by events out of Labour’s control.
“Unfortunately for the government, the worst is yet to come. Just this week, the IMF slashed its growth forecasts for the UK from 1.3% to 0.8% in 2026, the worst revision within the developed world. With the economy already achieving a run-rate of 0.8% growth on the same period last year, the implication is that headwinds will build from here on. Although the UK is expected to bounce back somewhat in 2027, the fact remains that the UK economy remains particularly at risk from global shocks.
“This surprising growth, however, will have implications for the Bank of England and whether it can get back to cutting rates this year. The market still expects it to cut at least once this year and with a fairly strong start to 2026, that may give it enough cover to do so. However, with growth now forecast by some to stall completely, the BoE is going to have to make a call on how much to look through any inflation spike and focus on the potential growth implications that are to follow. The UK economy has started 2026 well, but finds itself in a weakened position now, and any hikes could just cut off any green shoots that do survive this period.”
Commenting on the latest UK GDP figures, Scott Gardner, investment strategist at J.P. Morgan Personal Investing said:
“The UK economy beat expectations in February, showing strong growth during the month before the war with Iran broke out. While this is a positive reading, the uncertain situation in the Middle East and resulting spike in oil prices could mean this return to growth is short-lived.
“In February, industrial production and services rose sharply. The rise was partly offset by manufacturing activity contracting. Retail sales fell after a stronger than expected January while the property market remains subdued.
“Looking ahead, the conflict in the Middle East and escalation in the Strait of Hormuz has dented the growth outlook for the UK economy. Oil prices had already been rising in recent months, but the latest spike could be especially painful for businesses and consumers through higher costs and elevated interest rates. The impact of the conflict is starting to filter through into the March figures with PMI data pointing towards a softening in services activity. The extent to which the conflict hits UK growth this year will hinge on the duration of the disruption in the Strait of Hormuz and persistence of the oil price shock. Despite diplomatic efforts, the situation remains uncertain.”
Derrick Dunne, CEO of YOU Asset Management, has commented:
“This sadly backward-looking data gives us a look at what might have been, had the Middle East crisis not erupted. The UK economy surged well ahead of expectations, bouncing back from headwinds in previous quarters such as the Jaguar Land Rover cyber-attack which had weighed on activity.
“This is of course a look at a past that might have been, rather than a trajectory which we are now firmly not on. The Iran war has totally upended economic expectations, given the choke hold of oil and gas – and other essential commodities – in the Strait of Hormuz.
“The biggest net effect that is now coming for the UK economy is the surge in cost-push inflation that rising energy prices will have across sectors. Consumers will likely have to batten down the spending hatches as such increases act like a stealth rate hike. This could snuff out the surprise economic performance before it has a chance to bed in.
“Rate expectations are understandably elevated, but the Bank of England will remain cautious. However, better than expected economic data might give rate setters more courage that at least holding rates for now might be less damaging than previously thought.
“Anyone unsure what this could mean for their long-term financial plans should consider consulting with a financial planner.”
Ian Corfield, the CEO of Secure Trust Bank, said:
“The February GDP figures show that the UK economy was building more momentum than expected before the sharp deterioration in the global backdrop. Growth of 0.5%, driven by services, production and construction, suggests that both households and businesses were proving more resilient at the start of the year than many had assumed, despite ongoing cost pressures.
However, given the current global environment, this data now feels distinctly backward looking. Since late February, higher energy prices, elevated borrowing costs and increased uncertainty have materially changed the outlook. For UK households, this risks further pressure on disposable incomes, while for businesses it adds to concerns around confidence, investment, and cash flow as the year progresses.
For the banking sector, this reinforces the need to remain balanced and prudent. There are clear signs of underlying economic strength, but the external shocks facing the UK economy mean both consumers and businesses are likely to remain cautious. The focus now will be on how well the economy absorbs these pressures, and whether earlier momentum can be sustained in a far more challenging environment.”
Kevin Brown, savings expert at Scottish Friendly, has commented:
“While any economic growth is welcome, February’s positive GDP reading is likely to prove short-lived unless there is a swift resolution to the ongoing conflict in the Middle East.
“The fallout has already hit the UK economy, with business confidence slumping and households contending with soaring mortgage rates.
“Add to the mix that the UK is a net energy importer, and therefore heavily exposed to price changes in global energy markets, and you have a toxic combination for a government desperate to drive up growth and living standards.
“The immediate prospects for the UK economy ultimately hang on what happens next. If tensions escalate again, energy prices and borrowing costs will likely soar, increasing the prospect of a recession. But even if a compromise is reached soon, it is still too early to say whether there has been any lasting economic scarring.
“The message to households is not to panic, but to focus on boosting financial resilience. That means cutting back where possible, building a financial buffer where feasible, and seeking out the best returns on savings to ensure they are working as hard as they can be.”
Susannah Streeter, chief investment strategist, Wealth Club
”The Footsie is off on the front foot in early trade, boosted by hopes of a ceasefire being extended in the Middle East and a surprise boost in the UK’s growth story. There are much better marks on the UK’s economic report card after the surprise acceleration in activity in February. The 0.5% increase was much stronger than the 0.1% growth figure forecast. This is heartening news, given it shows there is more resilience to deal with the repercussions of the Iran war. Earlier snapshots indicated that the activity had been flatlining, but growth for January has also been revised upwards. Banks, retailers and housebuilders are among the gainers in early trade as the UK’s fortunes turn a little more positive.
Unfortunately, it’s likely to be a brief respite given the toxic economic shock being unleashed by the Middle East conflict, with sharply higher energy costs set to weigh down companies and consumers. There will be fears that the economy will have taken one step forward only to take two steps back once the full effects filter through. Services and manufacturing grew by 0.5% in February, both sectors which are likely to be hit by a squeeze as bills rise, with consumers set to become more cautious and companies hit with higher running costs. Construction also rose by 1% with building sites whirring back to activity. The more positive reading has put more of a spring in the step of housebuilders in early trade, but with interest rates looking set to rise and materials costs increasing there is still a risk of fresh weakness ahead.”
Rob Morgan, Chief Investment Analyst at Charles Stanley, part of Raymond James Wealth Management comments that today’s data is just a welcome bounce before adverse energy impact hits saying:
“The UK economy has started the year with a modicum of momentum. Following a small rise of 0.1% recorded for January, today’s data shows activity accelerated in February with a 0.5% increase. The uptick was broad based, led by construction which expanded by 1%.
“The relatively buoyant start to the year will come as a relief to policymakers as the UK finds itself at the mercy of global energy markets roiled by the effective closure of the Strait of Hormuz.
On the outlook for the economy from here Morgan said:
“As the conflict in the Middle East hopefully draws to close, the longer-term consequences are still unfolding. The sudden increase in global oil and gas prices threatens to reignite inflation, drain household finances and squeeze company profits, which could put the skids under an encouraging start to the year for the UK economy.
“This impact won’t start to show in the growth figures until the March data is released next month but given the lengthy disruption to oil and gas trade, a higher base for energy prices, and costs for businesses and consumers, is already baked in. Global inventories of oil and gas have been drawn down and must be rebuilt, plus the costs involved in rebuilding middle east capacity and facilities damaged in the conflict stand to keep prices elevated, even though there will be some global demand destruction that offsets this.
“The UK is vulnerable to elevated energy costs owing to its reliance on imports and comparative lack of storage capacity. Even when alternative suppliers can be found, global prices still set the cost. That’s why rises in oil and gas prices have been felt so quickly at the forecourts and are likely to feed into household energy bills if the fallout of the crisis drags on.
“If energy prices retreat, the UK economy could weather the storm reasonably well and even regain some momentum later in the year. But a higher plateau risks pushing the country towards an unwelcome cocktail of ‘stagflation’ – stubborn inflation and weaker growth – that dents both corporate performance and household budgets.
“Even before the disruption to energy markets the economic projections were shifting downwards for the near term. Back in November 2025, the OBR expected the economy to grow by 1.4% in 2026, up slightly from the previous year’s 1.3%. That forecast was then revised to 1.1% in the spring statement as a cooling labour market weighed on the outlook, but this is now stale too. The International Monetary Fund now expects UK growth to be well under 1% this year – one of the largest downgrades among major economies – and the average forecast among economists is just 0.6%.”
