First-quarter expansion of 0.6% masks deepening fragility

The UK economy expanded by 0.3% in March, bringing first-quarter growth for 2026 to 0.6% and exceeding the gloomy predictions that dominated the start of the year.

But economists are urging against complacency, warning that the figures conceal a far more troubling picture beneath the surface.

Resilience, not strength

According to Emeritus Professor Joe Nellis, economic adviser at MHA, the accountancy and advisory firm with a base in Birmingham, the apparent resilience should not be mistaken for genuine strength.

“While this outcome surpasses gloomy early-year predictions and most forecasts, it is now dangerously clear that the economy is only skirting the edge of stagnation,” he said.

Growth is being propped up by a narrow lifeline from the services sector, particularly professional and business services, while manufacturing remains subdued, investment is stalling and consumers are buckling under rising mortgage and living costs.

Middle East crisis bites

The March figures are also the first official GDP data to capture the early impact of the escalating Middle East crisis. Professor Nellis warns this could prove a decisive turning point.

Surging energy prices, damaged supply chains and deepening geopolitical turmoil are already inflating business costs and sapping confidence, with the highly exposed UK economy facing a direct and serious threat if the upheaval continues.

Fiscal pressure mounts

The public finances face their own reckoning. Quarterly growth of 0.6% offers no meaningful relief for the Treasury, with tax receipts set to lag behind mounting spending pressures from inflation, debt and welfare. The Chancellor faces an increasingly narrow fiscal path.

Calls for decisive action

Professor Nellis is calling for immediate policy intervention. Households facing rising energy costs will need targeted support to prevent a further collapse in demand.

Businesses need cost reductions and incentives to invest and innovate. And while a closer trading agreement with the EU would not solve everything, he argues it would at least provide a meaningful start.

Professor Nellis said: “The UK economy has displayed resilience, but time is running out.”