Commuters on April 20, 2026 in London, United Kingdom.
Rasid Necati Aslim | Anatolia | Getty Images
Britain’s economy shrank 0.1% in the month to April, figures showed on Friday, as the impacts of the war in Iran continued to dampen growth.
A 0.2% contraction in services activity was cited as the main driver of negative growth, with officials saying it was partly offset by a 0.1% rise in construction output. Production showed zero growth for the month.
Economists polled by Reuters expected the British economy to contract by 0.1% month-on-month.
The April figure follows growth of 0.3% in March, 0.4% in February and zero growth in January.
How the war in Iran affected British growthOne of the main causes of the decline in services came from a 9.1% drop in sports, entertainment and leisure activities. The Office for National Statistics (ONS) said this was the largest negative contribution from a single industry to both service output and real GDP growth.
Part of the sector’s decline has been attributed to the war, with the ONS highlighting that the cancellation of various sporting events in the Middle East had affected production at UK-based companies.
Companies operating in the manufacturing, wholesale, transport support and travel agency sectors said the conflict in the Middle East contributed to their reduced turnover in April.
“A common theme in comments received was rising prices due to conflict in the Middle East,” the ONS said. “These comments primarily related to energy and fuel costs, with some suggesting an impact seen in April 2026 and also suggesting an impact for months to come.”
Suren Thiru, chief economist at the Institute of Chartered Accountants in England and Wales, said the data made a Bank of England rate cut next week unlikely, with falling GDP signaling a “damaging descent into stagflation”.
“This decline is the first economic blow from the Iranian conflict, with falling fuel sales and slowing service production causing the UK’s growth momentum to halt earlier this year in April,” he said.
“Soaring fuel prices have significantly changed the UK’s growth trajectory, moving from a growth tailwind in March to a headwind in April as motorists reduced their consumption in the face of soaring prices at the pump, having anticipated their purchases in March.”
The US-Iranian war, which recently crossed the 100 day marktriggered supply constraints in global energy markets, causing a resurgence of inflation.
The International Monetary Fund warned in April that war could harm the UK’s growth the most of any major economy.
As a net importer of energy, the UK is particularly vulnerable to energy shocks that affect the global supply chain.
The IMF now forecasts UK growth of just 0.8% in 2026, down from a previous forecast of 1.3% made at the start of the year.
In the United Kingdom, headline inflation ease to 2.8% in April, which was largely attributed to the UK energy regulator’s national cap on energy prices.
From July, the price cap will increase by 13%, allowing energy suppliers to pass on some of the high costs of oil and gas.
