22/06/2026
Surprise UK growth fails to ease pressure on public finances
Britain’s economy grew by 0.3% in March, defying expectations of a slight contraction linked to disruption from the war. According to ONS, the increase was partly driven by consumers and businesses bringing forward spending ahead of anticipated price rises.
This stronger monthly performance contributed to first-quarter growth of 0.6%, marking the fastest pace in a year and the strongest among G7 nations to have reported figures so far. Car sales and leasing were among the standout areas, while retailers noted increased demand from motorists stocking up on fuel as petrol prices rose sharply. Both construction and retail sectors played a key role in the quarterly rebound.
Despite this positive momentum, the outlook remains uncertain. In the month, the International Monetary Fund (IMF) upgraded its forecast for UK growth this year but cautioned that the war, alongside ongoing ‘domestic uncertainty,’ could weigh on economic activity later in the year.
Chancellor Rachel Reeves welcomed the figures as evidence that the government has “the right economic plan.” She also warned that the Labour leadership contest risks destabilising the economy at a critical time. This concern has been reflected in financial markets, with government borrowing costs rising notably. Ten-year gilt yields briefly exceeded 5.17% in the month, their highest level since 2008, amid heightened political uncertainty. While borrowing costs have increased across Europe since the onset of the conflict, movements in the UK have been more pronounced.
Public sector borrowing rose to £24.3bn in April, an increase of £4.9bn compared with the same month last year and the highest April figure since the pandemic. Debt interest payments reached a record £10.3bn for the month, as higher benefit costs and State Pension increases pushed spending well above tax revenues.
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