The UK economy shrank by 0.1% in April, official figures revealed Friday, as the ongoing conflict involving Iran continued to weigh on business activity.
A 0.2% contraction in services output was identified as the primary driver of the decline, with officials noting it was partly offset by a 0.1% rise in construction output.
Production output recorded zero growth for the month, adding to a picture of broadly stagnant economic activity across key sectors.
The April figure followed growth of 0.3% in March, 0.4% in February, and no growth in January, marking a clear deterioration in the UK’s early-year momentum.
Economists polled by Reuters had anticipated the 0.1% month-on-month contraction, meaning the data landed in line with expectations but offered little comfort to policymakers.
One of the sharpest drags came from a 9.1% fall in sports, amusement, and recreation activities, which the Office for National Statistics said was the largest negative contribution from a single industry to both services output and real GDP growth.
The ONS noted that cancellations of sporting events in the Middle East had affected the output of UK-based companies, with the conflict cited across multiple sectors including manufacturing, wholesale, transportation support, and travel agencies.
“A common theme of the comments received was the increase in prices because of the Middle East conflict,” the ONS said, adding that “these comments were mainly for energy and fuel costs, with some suggesting an impact seen in April 2026 and also suggesting an impact for future months.”
Suren Thiru, chief economist at the Institute of Chartered Accountants in England and Wales, warned the data signaled a “damaging descent into stagflation” and made a Bank of England rate cut next week unlikely.
“This decline is the first economic blow landed by the Iran conflict as falling fuel sales and slowing services output meant the UK’s early-year growth momentum stalled in April,” Thiru said.
“Skyrocketing fuel costs have noticeably altered the UK’s growth trajectory having flipped from a tailwind to growth in March to a headwind in April as motorists cut consumption in the face of surging pump prices, after frontloading purchases in March,” he added.
The US-Iran war, which recently crossed the 100-day mark, has sparked supply constraints in global energy markets and prompted a resurgence of inflationary pressure worldwide.
The International Monetary Fund warned in April that the UK could face the largest growth hit from the conflict of any major economy, given its status as a net energy importer.
The IMF is now forecasting UK growth of just 0.8% in 2026, sharply below its earlier projection of 1.3% made at the start of the year.
UK headline inflation eased to 2.8% in April, a decline largely attributed to Britain’s national energy price cap, though that cap is set to rise by 13% from July, allowing energy providers to pass elevated oil and gas costs onto consumers.
