While expectations were low due to growing international tensions, the United Kingdom’s economy unexpectedly grew in March. Gross domestic product increased by 0.3% month-to-month in March, per Reuters, with a 0.2% contraction.  

In the first quarter, the UK’s economy outpaced the United States and most other European nations, but ongoing global tensions hold the potential to weigh on continued strength. The positive growth was fueled by the strength of the services sector, which expanded 0.8% according to the Wall Street Journal, with strong growth in construction output and manufacturing as well. March wrapped up a strong first quarter, with the economy expanding by 0.6% effectively marking the third year of positive first quarter growth likely fueled by post-pandemic shifts in spending habits.  

“Nevertheless, recession risks have risen, and we now ​expect the UK economy to contract mildly in the second and third quarters of this year,” said Raj Badiani, economics director at S&P Global Market Intelligence.  

While the conflict in the Middle East shook investors, the first quarter growth has brought new confidence with UK shares increasing. The blue-chip FTSE 100 index ended 0.46% higher while the mid-cap FTSE 250 rose 1.33%, according to Reuters.  

Despite the positive growth, analysts warn that figures are inflated due to the stockpiling of goods in light of supply chain disruptions from the war. “We need to be ​cautious about judging the genuine trend,” said Rob Wood, chief UK ⁠economist at Pantheon Macroeconomics, per Reuters.  

Furthermore, the positive news comes with anxiety that the UK will not continue this growth through to the end of the year. “UK GDP has developed a habit of starting the year well, only for momentum to slow due to residual seasonality,” said George Brown, senior economist at Schroders, per Reuters. “…That ​should mean the Bank of England talks tough but stops short of the ​hikes markets are pricing in.” 

In April, the International Monetary Fund cut its estimate for UK growth in 2026 from 1.3% to 0.8%, per the Wall Street Journal, the largest downgrade in any major developed economy. One contributing factor is the nation’s position as a large energy importer, making it more sensitive to rising energy prices amid the ongoing blocking of the Strait of Hormuz.  

Long-term borrowing costs surged to their highest point in nearly 30 years last week, according to Reuters. Legal and General stock rose 6.16%, landing among the top percentage gainers in the FTSE 100. Auto stocks advanced 3.23%, outpacing a 3% slide in investment banking index.  

According to FCIB’s Credit and Collections Survey, customers in the UK typically extend 1-30-day terms (46%) followed by 31-60-day terms (38%), 61-90-day terms (8%) and over 90 days (8%). Customers are 10 days beyond terms on average, with delays mostly attributed to billing disputes (40%), cash flow issues (40%) and cultural norms and customs (40%).  

“The UK is generally straightforward to work with,” one respondent wrote. “The time difference still allows for real-time communication during U.S. business hours.”  

“Be aware that certain products may require specific labeling,” another respondent wrote.