Monthly GDP grew by 0.5% in February, following a growth of 0.1% in January and 0.1% in December, the latest ONS figures show.
The monthly GDP figure beat expectations for a 0.1% rise in February.
Real GDP grew by 0.5% in the three months to February, following growth of 0.3% in the three months to January and no growth in the three months to December.
The figures suggest that a recovery in the UK economy was underway prior to the war in Iran beginning at the end of February.
Industry experts now largely expect growth to stall in the upcoming months, however others believe that the better-than-expected figures could prompt the Bank of England to hold rather than increase interest rates.
Patrick O’Donnell, chief investment strategist at Omnis Investments, commented: "Monthly GDP beat expectations for a 0.1% rise in February. However, with subsequent events in the Middle East, this will very much be viewed as backward-looking data. It won’t have much of an impact on MPC thinking at their next meeting at the end of the month.
"With uncertainty high and multiple crosscurrents, we expect the BoE to sit on their hands. Looking beyond April, the market is split between 25bps and 50bps of hikes by the end of the year. With the BoE still viewing bank rate as being still in restrictive territory, currently, we think it is more likely that they remain on hold.”
Lindsay James, investment strategist at Quilter, said: “The UK economy has bounced back somewhat as it continues its fragile start to 2026, with growth coming in at 0.5% for February, a recent high amidst stalling figures. Given this will only have taken into account the first days of the US-Iran conflict, the true fallout, however, is yet to be felt, but nevertheless this will be a welcome relief to the Labour government. Growth has also been revised up to 0.3% in January too, suggesting that a recovery in the UK economy was underway prior to events in Iran kicking off at the end of February. 2026 was the year the government was hoping to build on following a challenging first 18 months in power, but all that work may have just been undone by events out of Labour’s control.
“Unfortunately for the government, the worst is yet to come. Just this week, the IMF slashed its growth forecasts for the UK from 1.3% to 0.8% in 2026, the worst revision within the developed world. With the economy already achieving a run-rate of 0.8% growth on the same period last year, the implication is that headwinds will build from here on. Although the UK is expected to bounce back somewhat in 2027, the fact remains that the UK economy remains particularly at risk from global shocks.
“This surprising growth, however, will have implications for the Bank of England and whether it can get back to cutting rates this year. The market still expects it to cut at least once this year and with a fairly strong start to 2026, that may give it enough cover to do so. However, with growth now forecast by some to stall completely, the BoE is going to have to make a call on how much to look through any inflation spike and focus on the potential growth implications that are to follow. The UK economy has started 2026 well, but finds itself in a weakened position now, and any hikes could just cut off any green shoots that do survive this period.”
Derrick Dunne, CEO of YOU Asset Management, added: “This sadly backward-looking data gives us a look at what might have been, had the Middle East crisis not erupted. The UK economy surged well ahead of expectations, bouncing back from headwinds in previous quarters such as the Jaguar Land Rover cyber-attack which had weighed on activity.
“This is of course a look at a past that might have been, rather than a trajectory which we are now firmly not on. The Iran war has totally upended economic expectations, given the choke hold of oil and gas – and other essential commodities – in the Strait of Hormuz.
“The biggest net effect that is now coming for the UK economy is the surge in cost-push inflation that rising energy prices will have across sectors. Consumers will likely have to batten down the spending hatches as such increases act like a stealth rate hike. This could snuff out the surprise economic performance before it has a chance to bed in.
“Rate expectations are understandably elevated, but the Bank of England will remain cautious. However, better than expected economic data might give rate setters more courage that at least holding rates for now might be less damaging than previously thought."
