- UK GDP grew by 0.5% in February
- The services and production sectors were powering the economy, but construction was still in the doldrums
- January’s growth estimate was also revised up to 0.1% from no growth previously
Danni Hewson, AJ Bell head of financial analysis, comments on the latest UK GDP figures:
“It feels almost cruel that the UK economy had managed to find a higher gear in February and grew faster than had been thought in the opening days of 2026.
“After a disappointing end to 2025 – which was one of the factors in the IMF’s calculations suggesting the UK economy will take the biggest hit of G7 countries because of the Iran war – the start of this year had looked surprisingly buoyant. The hugely important service sector was responsible for much of the momentum, with the jobs market showing tentative signs of recovery as businesses brushed off the impact of increased labour costs.
“Big ticket purchases were back on the table with car sales notably higher, people were already booking their summer holidays, and accountants and bookkeepers saw a spike in workload as businesses prepared for the huge change of Making Tax Digital which went live at the start of April.
“The bounce back from last year’s cyber-attack on Jaguar Land Rover was continuing to power the production sector as the supply chain raced to take advantage of pent-up demand.
“But it wasn’t all good news, with construction still stuck in the doldrums as housebuilders continued to display an abundance of caution. This will have only been exacerbated by the situation in the Middle East, which has altered the expected path of interest rates.
“Whilst the governor of the Bank of England has made it clear he understands the tightrope the MPC must walk over the coming months if it’s to prevent inflation from becoming embedded in the UK economy, many would-be house buyers have had the rug pulled out from under their feet.
“They had been anticipating further falls in interest rates this year, potentially waiting for that sweet spot where lenders fought to offer the lowest mortgage rates to make that dream home a touch more affordable. Now the outlook for the housing market is threatened by billowing dark clouds, the same storm that will make companies think twice about new investment and new hires as consumers once again struggle to tighten their belts.
“February’s growth does highlight the resilience of the UK economy, but the picture painted by these figures might as well be used to wrap up today’s chippy tea.”
