Financial News: U.K. Economic Growth Climbs To 0.6%

U.K. Economic Growth Climbs To 0.6%

(RTTNews) - The U.K. economy grew at a stronger pace in the first quarter of the year ahead of the escalation of geopolitical tensions in the Middle East that triggered supply disruptions and a surge in crude oil price.

Gross domestic product increased 0.6 percent sequentially, following the fourth quarter's 0.2 percent expansion, the Office for National Statistics said. The rate matched economists' expectations.

The service sector drove expansion with a 0.8 percent growth, while construction output and industrial production grew 0.4 percent and 0.2 percent, respectively.

In March, GDP expanded unexpectedly by 0.3 percent after rising 0.4 percent in February. Economists had forecast a 0.1 percent contraction in March due to supply disruptions and higher fuel prices amid the closure of the Strait of Hormuz.

Industrial output dropped 0.2 percent in March from the previous month but manufacturing advanced 1.2 percent. Mining and quarrying shrank 2.3 percent, and energy output fell 3.8 percent.

In 2025 as a whole, GDP advanced 1.4 percent compared to 1.0 percent growth in 2024.

The International Monetary Fund has projected the U.K. economic growth at 0.8 percent this year and 1.3 percent in 2027.

ING economist James Smith said the U.K. economy has grown much faster in the first quarter than in the rest of the year since 2022 and this year is likely to be no different.

The economist said the latest data will not change much for the Bank of England, which is singularly focused on the impending inflation spike and the risk of it spilling into wage growth. Smith expects a one-and-done rate hike in June.

The Confederation of British Industry economist Ben Jones said the first quarter rebound looks unusually strong, largely reflecting February's outsized gain.

"With higher fuel and energy costs feeding through and disruption to global supply chains set to intensify the longer the Strait of Hormuz remains closed, pressures on businesses will mount, creating headwinds that are likely to weigh on growth through the remainder of 2026," Jones said.

British Chambers of Commerce Research Manager Stuart Morrison said GDP rising by 0.3 percent in March suggests the continued resilience of business in the face of economic shocks. However, firms are concerned the full impact of the Iran conflict will start to show in the coming months, Morrison added.

Separate data from the ONS showed on Thursday that the visible trade deficit widened to GBP 27.2 billion in March from GBP 22.8 billion in February. Exports grew only 0.1 percent, while imports surged 8.1 percent.

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