U.K. GDP April 2026: Economy shrinks 0.1%

The latest economic figures released on Friday revealed that the U.K. economy contracted by 0.1% in the month of April, with the ongoing impacts of the Iran war continuing to hinder growth. The decline was primarily driven by a 0.2% contraction in services activity, although this was partially offset by a 0.1% increase in construction output. Production output remained stagnant for the month. Economists had anticipated a 0.1% contraction in the British economy for the month.

The decline in services was largely attributed to a significant 9.1% drop in sports, amusement, and recreation activities, marking the largest negative contribution from a single industry to both services output and real GDP growth. The cancellation of various sporting events in the Middle East due to the war had a direct impact on the output of U.K.-based companies in this sector. Additionally, companies operating in manufacturing, wholesale, transportation support, and travel agencies reported reduced turnover in April, citing the conflict in the Middle East as a contributing factor.

The surge in prices, particularly in energy and fuel costs, as a result of the Iran conflict was a common theme among businesses. This increase in costs had tangible effects on the U.K.’s growth trajectory, prompting a decline in fuel sales and a slowdown in services output. Suren Thiru, chief economist at the Institute of Chartered Accountants in England and Wales, noted that the GDP decline signaled a concerning trend towards stagflation, making a rate cut from the Bank of England unlikely.

The U.S.-Iran war, which has now surpassed the 100-day mark, has led to supply constraints in global energy markets, causing inflation levels to rise. The International Monetary Fund (IMF) has warned that the U.K. could face the biggest hit to growth from the war out of all major economies, given its status as a net energy importer vulnerable to energy shocks in the global supply chain. The IMF has revised its growth forecast for the U.K. to just 0.8% in 2026, down from an earlier prediction of 1.3%.

Inflation in the U.K. eased to 2.8% in April, largely attributed to a national energy price cap imposed by Britain’s energy regulator. However, the price cap is set to increase by 13% from July onwards, allowing energy providers to pass on some of the heightened costs of oil and gas to consumers.

The ongoing repercussions of the Iran war are expected to continue influencing the U.K. economy in the coming months, with uncertainties surrounding energy prices and global supply chains posing challenges for economic growth and stability.