The UK economy grew faster than most forecasters had expected in February 2026, with gross domestic product rising by 0.5% compared with January, according to the Office for National Statistics. It is the strongest monthly expansion since January 2024 and follows an upwardly revised reading of 0.1% for January.
The three-month rolling figure also came in at 0.5%, driven by broad-based gains across services — notably wholesaling, market research, hospitality and publishing.
The numbers at a glance
| Measure | Result | Previous period |
|---|---|---|
| Monthly GDP (Feb 2026) | +0.5% | +0.1% (Jan, revised up) |
| Three-month rolling growth | +0.5% | +0.3% |
| Year-on-year growth | Stronger than consensus | — |
| Main driver | Services sector | Services sector |
Why the data is already out of date
There is an important caveat attached to today's release: the February data predates the start of the Iran war on 28 February. The conflict has since pushed Brent crude above $100 a barrel, lifted wholesale UK gas prices by roughly 75% between late February and late March, and forced lenders to reprice fixed-rate mortgages upwards. Forecasters now expect GDP growth for the full year to come in materially below the pre-war trajectory.
The International Monetary Fund this week cut its 2026 UK growth forecast to 0.8%, down from 1.3% in January — the steepest downgrade for any G7 economy.
What it means for the Bank of England
The stronger-than-expected activity data complicates the outlook for the Monetary Policy Committee, which next meets on 30 April. Before the Iran conflict, markets had been pricing in two rate cuts this year. That has reversed: traders now expect the base rate to stay at 3.75% at the next decision, with some economists flagging the possibility of a rate hike before year end.
Base-case scenarios for April 30
- Hold at 3.75% — the most likely outcome, given sticky inflation and the energy shock
- 25bp cut — possible if the Iran ceasefire holds and oil retreats below $85
- 25bp hike — tail risk if inflation prints above 3.5% and wage growth remains firm
Impact on UK businesses
For small and mid-sized firms, the February data is encouraging but backward-looking. The practical pressures right now are higher input costs from energy, tighter margins in consumer-facing sectors, and customers who are themselves cautious. Businesses that rely on the public sector may want to factor in the new procurement rules that came into effect on 1 April — below-threshold contract awards now require the successful bidder to hold a Central Digital Platform supplier ID.
Impact on households
Mortgage borrowers coming off fixed deals in 2026 face the biggest adjustment. The Bank of England estimates that around 1.3 million additional households will see higher monthly payments by the end of 2028 as a result of the Iran shock, taking the total affected to 5.2 million. On the upside, the Ofgem price cap fell by £117 a year on 1 April, and the state pension is rising by 4.8% in line with the triple lock.
What to watch next
- 16 April: CPI inflation data for March (released next week)
- 30 April: Bank of England MPC decision and Monetary Policy Report
- 27 May: Ofgem announces Q3 2026 energy price cap
- Spring: First full-quarter data covering the war period — due mid-May
Disclaimer: This article is for general information only. It is not financial, tax or investment advice. Economic data is subject to revision and market expectations change rapidly. Consult a qualified adviser before making decisions about mortgages, investments or business planning.
Frequently asked questions
Does 0.5% growth mean the UK is out of the woods?
No. The February reading is a single data point from before the energy shock. Forward-looking surveys and wholesale energy prices suggest momentum has slowed since.
Will the Bank of England cut rates on 30 April?
Markets currently expect a hold at 3.75%. A cut would require clear evidence that the energy-driven inflation spike is contained.
How does GDP affect my mortgage?
GDP itself does not set mortgage rates directly. But it feeds into the Bank's inflation forecast, which determines the base rate, which in turn influences swap rates and fixed-rate mortgage pricing.
Where does the ONS get this data?
Monthly GDP is built from business surveys, VAT returns and administrative data across the services, production and construction sectors. The February release also contained small upward revisions to earlier months.
