Britain’s economy posted a far stronger-than-expected expansion in February, offering a welcome boost to policymakers and markets, even as economists caution that the figures may already belong to a different economic reality shaped by the Iran conflict and the resulting energy shock.
According to preliminary figures from the Office for National Statistics, U.K. gross domestic product grew 0.5% month-on-month in February, sharply above the 0.1% increase forecast by economists polled by Reuters and marking the strongest monthly expansion since early 2024. The result also follows an upwardly revised 0.1% growth in January, after the initial estimate had suggested the economy was flat.
The data points to a broad-based improvement across the economy. The services sector, which accounts for the largest share of British output, expanded 0.5%, while production also rose 0.5%, helped by stronger mining, energy supply, and manufacturing activity. Construction climbed 1%, suggesting that growth was not concentrated in one part of the economy but reflected a wider rebound in activity.
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That breadth is attractive because it suggests that, prior to the escalation in the Middle East, the U.K. had entered the first quarter with firmer underlying momentum than many had assumed. The stronger print also improves the near-term quarterly picture.
For the three months to February, the economy expanded 0.5%, comfortably ahead of expectations and potentially positioning the U.K. for one of its strongest first-quarter performances in recent years. However, the optimism surrounding the headline number is being tempered by what happened next.
The data covers a period before the U.S.-Iran conflict escalated on February 28, which has since triggered a sharp rise in oil and gas prices, higher freight costs, and renewed pressure on inflation across Europe. For Britain, which remains a net importer of energy, that shift is particularly consequential. This is why many economists are describing the February figure as backward-looking.
George Brown, senior economist at Schroders, was blunt in his assessment, saying: “I’m not really sure it’s reflective of actual conditions in the economy.”
He added: “Obviously, this is stale data, we’re going in to this new world with the Iran conflict. Going into that, while the February numbers would suggest we’re in a strong position, actually, the situation on the ground is probably not quite like that.”
That caution supports a broader concern in the market that February may represent the final snapshot of the economy before the geopolitical shock began feeding through into real activity.
Higher energy prices are expected to affect household spending, business costs, and industrial production in the months ahead. The surge in oil has already altered expectations for inflation and interest rates, with some analysts now seeing greater odds that the Bank of England may have to delay any policy easing or even consider tighter monetary conditions if price pressures persist.
The currency market has already responded. Sterling edged higher following the GDP release, supported both by the stronger economic data and by hopes that peace negotiations between Washington and Tehran could still produce a diplomatic off-ramp.
Equity markets across Europe also opened firmer as investors weighed the data alongside the latest geopolitical headlines. The pan-European STOXX Europe 600 rose about 0.25%, while London’s FTSE 100, Paris’s CAC 40, and Frankfurt’s DAX all posted modest gains in early trading.
Still, the larger macro story is less about February’s strength and more about what comes next. The International Monetary Fund has already become more cautious on the U.K.’s outlook, citing vulnerability to imported energy inflation and weaker business sentiment.
This practically means the strong February print may do little to change expectations for a softer second quarter if energy prices remain elevated.
There is also a statistical caveat. Some economists continue to question whether monthly U.K. GDP data may be influenced by residual seasonal distortions, especially given a pattern in recent years where early-year figures have tended to come in stronger before being revised later.
Even so, the release offers an important insight: the British economy had more momentum heading into the geopolitical crisis than markets had previously believed. The challenge now is whether that momentum can survive the external shock.
Economists note that if oil prices stabilize and diplomatic progress in the Middle East reduces energy-market stress, the February rebound could provide a solid foundation for the rest of the year. If not, it may come to be seen as the last strong reading before a far more difficult stretch for the U.K. economy.