A stronger UK economy in Q1 2026

Market Insight:

• The UK economy grew by a stronger-than-expected 0.6% in Q1, helped by a resilient services sector. Timing also played a role: the conflict in Iran, which began in late February, had not yet fed through into the data. This marks a sharp improvement on the three preceding quarters, each of which delivered growth of just 0.1 to 0.2%.
• However, the strong quarter did little to lift the annual growth rate, which current sits at 1.2%. The stronger quarterly growth did lift forecasts for the year though, consensus forecasts have been revised up to 1.0% growth for 2026, from 0.6% a month ago – a modest upgrade.
• Q1 does likely represent the high point for the year. Higher energy costs will weigh on the growth outlook for the remaining quarters.
• The strength of the relationship between economic growth and house price performance has been well-evidenced over decades.The implication for housing is overall low single-digit price growth. As ever, there will be scope for regional and localised variation, driven by where buyers have more room to absorb higher borrowing costs.
• One potential upside to the economic outlook is AI-driven productivity gains. The timing of any such gains remains difficult to predict, for now consensus forecasts point to a slowdown but this is a genuine swing factor worth watching. Source: Dataloft by PriceHubble, Nationwide, ONS, HM Treasury Consensus Forecasts