Commuters in London, UK, April 20, 2026.
Rashid Nekati Aslim | Anadolu | Getty Images
The UK economy contracted by 0.1% in the month to April as the impact of the Iran war continued to hamper growth, according to figures released on Friday.
A 0.2% contraction in services activity was cited as the main driver of the negative growth, which officials said was partially offset by a 0.1% increase in construction output. Output growth for the month was zero.
Economists polled by Reuters had expected the UK economy to contract by 0.1% from the previous month.
April’s growth followed March’s 0.3% and February’s 0.4%, and there was no growth in January.
The impact of the Iran war on Britain’s growth
One of the biggest drivers of service decline was a 9.1% decline in sports, entertainment, and recreation activities. The Office for National Statistics (ONS) said this was the largest negative contribution by a single industry to both services production and real GDP growth.
Part of the decline in the sector was due to the war, with the ONS noting that the cancellation of various sporting events in the Middle East had affected production at UK-based companies.
Companies in manufacturing, wholesale trade, transportation support and travel agencies said the Middle East conflict contributed to a drop in sales in April.
The ONS said: “A common theme among the comments received was the rise in prices due to the conflict in the Middle East.” “These comments were primarily about energy and fuel costs, with some suggesting impacts that will be seen in April 2026, and others over several months into the future.”
Suren Tiloo, chief economist at the Institute of Chartered Accountants in England and Wales, said the data made it less likely that the Bank of England would cut interest rates next week, as falling GDP signaled a “detrimental slide into stagflation”.
“Falling fuel sales and a slowdown in services production meant the UK’s growth momentum at the start of the year stalled in April, marking the first economic blow from the Iran conflict,” he said.
“The UK’s growth trajectory has changed markedly, with a tailwind to growth in March turning into a headwind in April as motorists cut consumption in the face of higher pump prices, after front-loading purchases in March due to higher fuel costs.”
The war between the United States and Iran, which recently exceeded 100 days, is causing supply constraints in global energy markets and prompting a resurgence of inflation.
The International Monetary Fund warned in April that Britain could suffer the biggest hit to growth from a war between major economies.
As a net energy importer, the UK is particularly vulnerable to energy shocks that affect global supply chains.
The IMF now forecasts UK growth of just 0.8% in 2026, down from its previous forecast of 1.3% at the start of the year.
In the UK, headline inflation fell to 2.8% in April. This is primarily due to the UK Energy Regulator’s cap on domestic energy prices.
Starting in July, the price cap will rise by 13%, allowing energy companies to pass on some of the higher costs of oil and gas.
