UK GDP (March/Q1) An unsustainably strong start to the year

Research evidence excerpt

UK GDP (March/Q1) An unsustainably strong start to the year

Economics ● United Kingdom

14 May 2026

Seasons greetings

Strong start or adjustment issue? It’s probably not sustainable either way

The UK has seen a strong start to the year in four of the last five years. Whether you attribute

that to natural New Year optimism or questionable seasonal adjustment, it certainly seems to be

a pattern. The ONS published a note on seasonal adjustment earlier this week, in which it said

that it has been subject to an external review which found no issues with its current adjustment

methodology, but noted that seasonality can evolve over time, and it could be that new trends

are still emerging, which it is too soon to incorporate.

In fact, in recent years and for 2026, the narrative of a New Year pick-up makes sense. The

second half of 2025 was taken up with speculation over the Budget, and investment and hiring

decisions were postponed pending a bit more clarity. It does appear that, at least until the

outbreak of conflict in the Middle East, there was a bit of a revival going on. Indeed, while the

war has hit costs and pricing hard, the impact on activity seems less drastic: the services and

manufacturing PMIs saw a decent bounce in April (chart 6), pointing to the ongoing resilience of

British businesses.

That said, some of that resilience likely reflects a degree of frontloading purchases amid price

and supply uncertainty, and we would say the outlook has deteriorated. With the Strait of Hormuz

still closed, we now see inflation above 4% y-o-y in November, and two interest rate rises in July

and September (see Feeling bad, 12 May 2026). As well as the GDP numbers, this morning also

saw the release of the RICS housing market survey for April, which recorded a sharp drop in the