UK economy posts strongest quarterly growth since 2022 as inflation cools

The British economy surged by 0.8% in the first three months of 2026, defying expectations of a sluggish recovery and delivering the strongest quarterly growth since late 2022, according to fresh data released by the Office for National Statistics on Wednesday.

Gross domestic product figures shattered forecasts of 0.5% growth, with economists scrambling to revise their projections upward. The rebound was fueled by a 2.1% jump in services output, led by hospitality and finance sectors, while manufacturing output rose 1.3%—its first increase in six months. Chancellor Emily Thornberry hailed the numbers as proof that "the government’s economic plan is working," though opposition leaders questioned whether the gains would reach ordinary families.

The uptick comes as inflation cooled to 2.7% in March, its lowest level in three years, easing pressure on household budgets. The Bank of England’s decision to hold interest rates at 4.25% last week appears to have stabilized borrowing costs, though mortgage holders continue to face elevated repayments. Retail sales data for March showed a surprise 0.4% rise, suggesting consumers are cautiously spending despite lingering financial strain.

Yet beneath the headline numbers, warnings persist. The Resolution Foundation estimates that real wages remain 3% below their 2019 peak, and the Institute for Fiscal Studies projects that household debt levels will climb another £50 billion by year-end. "The recovery is uneven," said economist Priya Kapoor. "While corporate profits are rebounding, wage growth is barely keeping pace with inflation. This isn’t the broad-based prosperity we were promised."

The Bank of England’s Monetary Policy Committee is scheduled to meet next week, with markets betting on a cautious tone. "The data suggests we’re on the right track, but risks remain," said Governor Andrew Bailey in a speech Monday. "We cannot declare victory over inflation just yet." Meanwhile, the government faces pressure to address stagnant wage growth and rising living costs ahead of the next fiscal statement on April 23.

1. April 23 — Chancellor Thornberry to deliver spring budget
2. May 10 — Bank of England interest rate decision
3. June 1 — New ONS employment statistics released

For now, the growth figures offer a rare bright spot in an otherwise turbulent economic landscape. Business leaders have welcomed the rebound, with the CBI’s director general calling it a "turning point." But with global uncertainties—from geopolitical tensions to potential trade disruptions—experts caution against over-optimism. "This is a fragile recovery," said Kapoor. "One shock could erase these gains faster than they were made."