The UK economy expanded by 0.5% in the first quarter of 2026, the Office for National Statistics confirmed on Friday, comfortably exceeding the consensus forecast of 0.3% and providing a welcome boost to Chancellor Rachel Reeves ahead of her spring spending review. The stronger-than-expected performance was driven primarily by robust growth in the services sector, which accounts for approximately 80% of the UK economy and expanded by 0.6% in the quarter.
The data represents the fastest quarterly growth rate since the second quarter of 2023 and will be seen as vindication of the government’s economic management by Treasury ministers who have spent recent months defending their fiscal strategy against criticism from business groups and opposition politicians. Chancellor Reeves described the figures as “genuinely encouraging” while cautioning that “there is much more work to do to deliver the sustained growth that working people across Britain deserve.”
Within the services sector, financial and professional services recorded particularly strong growth of 0.9%, reflecting the resilience of London’s position as a global financial centre despite ongoing post-Brexit adjustments. The technology sector also performed well, with output rising 1.1% as UK-based artificial intelligence companies attracted record levels of investment in the first quarter, according to separate data from Tech Nation.
Manufacturing output, however, told a different story, contracting by 0.3% as UK exporters continued to feel the impact of global trade uncertainty following the US tariff announcements of January 2026. The automotive sector was particularly affected, with production volumes at plants in Sunderland, Solihull and Swindon all falling below year-ago levels amid disruption to supply chains and weaker demand from key European markets.
Construction activity was broadly flat in the first quarter, rising just 0.1%, despite the government’s stated ambition to accelerate housebuilding. Industry bodies attributed the sluggish performance to planning bottlenecks, skilled labour shortages and continued caution among developers about committing to large-scale residential schemes until interest rates fall further.
The stronger GDP data prompted a modest upward revision in sterling, which rose to $1.2920 against the US dollar following the release. Government bond yields also ticked higher, with the 10-year gilt yield rising to 4.45% as investors slightly reduced their expectations of near-term Bank of England rate cuts.
— Sarah Mitchell, London Capital Post
