Boost for Reeves as GDP shows 0.6% growth despite Iran war crisis
The UK economy grew by 0.6 per cent this year, according to the latest gross domestic product (GDP) figures; this gave support to Rachel Reeves in the midst of the war crisis in Iran.
It follows the economic turmoil of days when investors sold government bonds as Keir Starmer’s leadership crisis continued, the pound fell and ministers resigned. MPs also called for Sir Keir to resign as prime minister.
Most economists expected official figures to show the economy turned around in March, contracting 0.2 percent after growth of 0.5 percent in February.
But returns for the quarter as a whole were boosted by the performance of the first two months of the year, with growth of 0.6 percent between January and March.
EY’s economic outlook shows that growth in consumer spending in the UK will almost come to a halt.
The report suggests growth could fall to just 0.3 percent this year if the Iran war escalates and the key Strait of Hormuz shipping route remains closed for the rest of the year.
Inflation will reach 4 percent by the end of 2026, according to the central forecast, where interest rates are believed to remain at 3.75 percent for the rest of the year, while unemployment will reach 5.8 percent as weak growth affects hiring.
Peter Arnold, EY’s chief UK economist, said: “Despite a relatively strong start to 2026, conflict in the Middle East means the UK economy is once again shaped by external shocks and is on track for another year of lower growth.
“We expect the first quarter of this year for GDP to follow a very promising trend, followed by a flat trend in the second quarter and a gradual recovery in 2027 as global markets adjust.
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“Restrictions on energy supply will increase inflation and delay interest rate cuts, increasing borrowing costs for businesses and causing some companies to re-evaluate their spending decisions.”
