Monthly GDP grew by 0.3% in March 2026, following growth of 0.4% in February, despite the outbreak of war in Iran. Susannah Streeter, Chief Investment Strategist at Wealth Club, shares her insights.
Despite the outbreak of war in Iran hitting sentiment, wallets and triggering deep uncertainty, the UK economy has shown surprising resilience. Growth of 0.3% in March hardly blows the lights out, but it confounds expectations, with the UK’s sturdiness surprising on the upside. A contraction had been expected. Instead, the huge services sector grew by 0.3%, while activity on construction sites continued to improve, with output rising 1.5%.
For the three months to March, the picture was even brighter, with growth of 0.6% for the economy as a whole and the services sector expanding by 0.8%. Upward revisions to earlier snapshots have helped paint a rosier picture of activity, as Budget uncertainty faded into the rear-view mirror and consumers and businesses became more confident. The slow but steady improvement, though, is likely to be upended by the energy crunch, with a long tail of repercussions expected.
Nevertheless, the FTSE 100 is set to be on the front foot in early trade as investors cheer the more robust performance of the economy, amid hopes it has the strength to endure the fallout from the conflict a little better. Trade talks between Trump and Xi Jinping are also helping to lift optimism amid hopes Beijing could help prise open the door to a resolution to the conflict with Iran.
The more upbeat UK performance is also likely to be too little, too late for Prime Minister Sir Keir Starmer. Like the economy, he has been languishing under a lacklustre image, even though his premiership has brought stability to the UK after years of volatility, helping fuel a rebound in the FTSE 100.
But now the scale of the revolt by backbench MPs, and the prospect of a leadership challenge from Health Secretary Wes Streeting, is keeping headlines occupied and investors on edge. UK gilt yields have retraced from the multi-decade highs of 5.13% reached earlier this week, but they are likely to remain volatile as machinations in Westminster stay front of mind.
