UK: February GDP grows, but the outlook remains uncertain amid inflation and energy pressures
16 APR, 2026
By Moneyfarm
By Richard Flax, Chief Investment Officer at Moneyfarm
The UK economy recorded growth of 0.5% in February, exceeding analysts’ expectations by 0.1 percentage points. The figure was driven in particular by the construction sector, which rose by 1%, as well as by services and production, both up 0.5% month-on-month. However, although this result represents a positive signal, the overall economic picture continues to be characterized by a high degree of uncertainty, fueled by the ongoing conflict in the Middle East and its broad economic repercussions.
The conflict in Iran has in fact caused significant disruption in global energy markets, contributing to an increase in fuel and energy prices for households and, consequently, to a strengthening of inflationary pressures. In this context, the recent downward revision by the International Monetary Fund of the UK’s growth forecasts for 2026, brought to 0.8% from the previous 1.3%, highlights how the British economy is particularly exposed to the effects of the conflict compared to other advanced economies. This vulnerability is linked both to dependence on energy imports and to relatively high levels of public debt.
Inflation, which in the early part of the year had shown signs of slowing, is now expected to rise, reaching a peak of around 4% in the coming months, driven by the sharp increase in energy prices. This scenario makes the task of the Bank of England more complex, as it is called to balance the need to support economic growth with its mandate to bring inflation back toward target. The decision to keep interest rates at 3.75% reflects a cautious approach, in which policymakers carefully assess the risk of a premature intervention against the need to preserve stability in an increasingly volatile environment.
Economic difficulties are also significantly affecting businesses and households. Consumer confidence remains fragile, and the persistence of restrictive financing conditions is likely to further increase pressures. Looking ahead, the trajectory of UK growth will depend largely on the evolution of the geopolitical context and on the ability of energy prices to stabilize in the coming months.
