TL;DR
- UK GDP grew at the fastest quarterly rate for a year in Q1 2026 (January to March).
- March 2026 alone grew 0.3%, the first full month of the Iran conflict.
- Resilient growth makes near-term Bank Rate cuts less likely; markets now price holds or rises through 2026.
- CPI inflation is 3.3% (March 2026) and expected to drift higher in H2 2026.
- Bank of England next meets 18 June 2026; markets see no cut at that meeting.
Last reviewed: 16 May 2026
What the numbers say
UK GDP grew at its fastest quarterly pace for a year in the first quarter of 2026, with a surprise 0.3% expansion in March, the first full month of the Iran conflict. The resilience came despite the cost-of-living squeeze and a Bank Rate held at 3.75% throughout the quarter.
Why the print matters
Until the Q1 release, the consensus had been that a slowing economy would force the Bank of England to resume rate cuts in the second half of 2026. Stronger growth, combined with CPI inflation at 3.3% and rising energy costs from the Middle East conflict, has shifted the bias from cuts to holds. A Reuters poll of economists in May 2026 showed 33 expecting the base rate to be unchanged through 2026, 14 expecting at least one rise, and 15 expecting one or more cuts. Goldman Sachs and Citi are in the unchanged camp; some lenders, including Tembo's research desk, see scope for rates to reach 5.25% if the conflict prolongs.
What it means for mortgages
Fixed mortgage rates are driven by swap rates, which have edged higher as markets price in less rate-cut probability. The cheapest 5 year fixes sit near 4.35% on a 75% LTV, with 2 year fixes broadly similar. Borrowers remortgaging off 2021 fixes will still pay a step-up. Trackers and SVRs are unchanged.
What it means for jobs and wages
Stronger growth supports the labour market but also adds to wage pressure. The MPC has consistently flagged services inflation and private sector wage growth as key inputs into its rate decisions. A tight jobs market combined with rising energy costs is the inflation-persistence scenario the Bank worries about most.
What to watch next
The April 2026 GDP release lands in mid-June, followed by the 18 June MPC decision and the 27 May Ofgem Q3 cap announcement. Together these three data points will reset the rate path for the rest of 2026.
Editorial note: Kael Tripton is an independent UK publisher. This article is general information, not financial, legal or regulated advice. Figures, rates and rules can change after publication. Always check the primary sources linked below before acting.
Frequently asked questions
Does stronger GDP mean rate cuts are off the table?
Not entirely. The MPC has said another global shock could change the outlook quickly. If the Middle East conflict eases and energy prices fall, cuts return as a base case in late 2026.
How does GDP affect my mortgage?
Indirectly. GDP feeds into the Bank's view of inflation, which drives Bank Rate decisions. Lenders also watch swap rates, which respond to growth and inflation expectations together.
Is the UK in recession?
No. A technical recession requires two consecutive quarters of negative growth. Q1 2026 was the strongest quarterly print for a year.
Where do I find the official GDP figures?
The Office for National Statistics publishes monthly and quarterly GDP releases (link in primary sources).
