UK economy grew faster than expected in February 2026, but the Iran war then caused big energy price rises that are now hurting future growth

In simple terms, Britain's economy performed better than most people thought it would during February 2026. According to official numbers from the Office for National Statistics (ONS), the total value of goods and services produced in the country (known as GDP) went up by 0.5% that month. This was the strongest monthly increase in more than two years and much higher than the 0.1% most economists had predicted. They also improved their figure for January to show a small 0.1% growth instead of no growth at all.

This growth happened before the war between the US, Israel, and Iran started at the end of February. That conflict quickly caused a big jump in energy prices around the world because of worries about oil and gas supplies. Experts now say this "energy shock" could slow down the UK economy a lot in the coming months and even risk a wider global slowdown if the fighting continues.

The good February numbers were driven especially by the services sector (things like shops, hotels, restaurants, finance, and entertainment), which makes up over three-quarters of the UK economy and grew by 0.5%. Manufacturing/production and construction also rose. Over the three months ending in February, GDP grew by a solid 0.5%.

However, the positive momentum looks short-lived. This week, the International Monetary Fund (IMF) lowered its forecast for UK growth in 2026 from 1.3% down to just 0.8% — the biggest downgrade among major rich countries. They pointed directly to the war's effects, including higher energy costs that could keep inflation (rising prices) above the Bank of England's 2% target for longer, meaning interest rates might not fall as hoped and could even stay high or rise.

Already, drivers are paying more for petrol and diesel, and people using heating oil have faced sharp increases (though home energy bills are protected by a price cap until July). Mortgage rates have gone up, and some deals have been withdrawn, making it harder or more expensive for people to buy homes.

Economists described the February growth as a "sizeable" bright spot or "bumper" result that "smashed expectations," but warned it was probably "already extinguished" by the war. One expert said the energy shock had "pulled the rug" from under the recovery, leading to higher inflation and a weaker job market ahead. Former Bank of England experts noted the economy had been quite flat for months before this, and the new data doesn't change the bigger challenges.

Politicians from different parties welcomed the figures but highlighted the difficulties ahead for families facing higher bills. Retailers like Tesco said the war is adding uncertainty for shoppers and businesses. In short, while February brought some encouraging news about the economy's strength just before the conflict, the ongoing effects of higher energy prices are now creating real worries for everyday costs, jobs, borrowing, and overall growth in the months to come.