On the surface, the last few months of economic data has painted a tentatively hopeful outlook for the UK despite the outbreak of conflict in the Middle East. However, the latest figures finally began to reveal the knock-on impact of shipping disruption and climbing oil prices on the economy.

The three months to April 2026 saw a 0.7% growth in GDP, but the monthly figures showed a 0.1% downturn in April following steady increases of 0.3% in March and 0.4% in February. Inflation held surprisingly steady at 2.8% as slow food inflation offset rising energy costs — but experts warn that it’s only a matter of time before the increasing cost of farming and production are reflected in food prices. As for the labour market, whilst unemployment rates eased slightly to 4.9%, vacancies fell to a five-year low as businesses took a risk-averse approach to recruitment.

There is a sense of ‘yes, but’ when it comes to reading the most recent figures: yes, the economy seems to be performing better than expected given the circumstances, but the warning signs of decline are there. Below, we dig into the details behind the stats.

GDP – April 2026

• In the three months to April 2026 compared to the three months to January 2026, UK GDP grew by 0.7%, a 0.1% increase on the 0.6% growth recorded in the three months to March 2026.
• Services output grew by 0.8%, the same as the growth recorded in the three months to March. Production output contracted 0.1% following a growth of 0.2% in the previous period.
• Meanwhile, construction output grew by 1.6% following a 0.4% growth in the three months to March 2026 — a continuation of partial recovery after five consecutive three-monthly falls from October 2025 to February 2026. However, this growth came solely from an increase in repair and maintenance, with new work down 0.3% despite government pledges to increase building output.
• In terms of month-on-month GDP, the UK economy shrank by 0.1% in April 2026 following growths of 0.3% in March and 0.4% in February. A 0.2% decline in services output — which the ONS largely attributed to a decline in sports activity, including the cancellation of events in the Middle East — was the main contributor to the April downturn, partially offset by a 0.1% rise in construction activity.
• Most forecasters have significantly downgraded their expectations for leading economies for the rest of the year, including the UK, as higher oil prices as a result of the Middle East conflict drive up inflation and slow down growth.

Inflation – May 2026

• To the surprise of many forecasters, the UK CPI rate remained at 2.8% in May despite the conflict in Iran, with rising energy costs offset by slower increases in food prices. The fact that the rate held steady raised hopes that the early impact of the Middle East conflict on prices may be more muted than economists feared.
• Core CPI (excluding energy, food, alcohol and tobacco) rose by 2.6% in the 12 months to May 2026, up from 2.5% in the 12 months to April. The CPI goods annual rate slowed from 2.4% to 2.0%, while the CPI services annual rate rose from 3.2% to 3.7%.
• Transport made the largest upward contribution, reaching 6.8% in May — the highest rate since November 2022. Air fares, vehicle taxes and petrol prices all pushed up inflation; air fares increased by 10.3% between April and May, compared with a 5% fall in the same two months last year.
• The largest downward contribution came from food and non-alcoholic beverages. Food inflation eased to 2.2%, the lowest since December 2024. However, experts warn that this is likely only a temporary respite, with higher farming, processing and manufacturing costs expected to trickle down to supermarkets in the coming months.

Employment

The latest Office for National Statistics labour force and employment data show:

• The UK unemployment rate for people aged 16 and over decreased from 5% to 4.9% in the three months to April 2026.
• UK job vacancies fell to a five-year low, with businesses cutting back on recruitment and moving cautiously as the war in Iran continued to unfold. The number of vacancies decreased by an estimated 19,000 (-2.6%) compared with December 2025 to February 2026.
• Youth unemployment continues to be a headline issue, though the rate fell slightly in this period from a 12-year high of 14.7% back to 14.5%. This is 1.8% higher than it was in February to April 2025.
• In February to April 2026, the inactivity rate for people aged 16 to 64 increased again, rising to 21%. This is 0.1% up on the quarter but 0.3% down compared to the same period last year.
• Annual regular pay growth remained at 3.4% in the three months to April 2026, sustaining an almost six-year low. Adjusted for inflation using the Consumer Prices Index including owner occupiers’ housing costs (CPIH), annual wage growth in real terms was 0.1% for regular pay and 1.2% for total pay in February to April 2026.

Insolvencies – May 2026

There were 1,868 company insolvencies reported in England and Wales in May 2026, a 10% decrease compared to April 2026 (2,087, adjusted) and a 16% decrease YoY (2,022). Insolvencies fell by around a quarter compared to the previous month across compulsory liquidations (-26%) and administrations (-24%), though company voluntary arrangements were up by 25% from April 2026 and 79% on the year.

Overall, this is a welcome improvement on April’s insolvency figures, which saw numbers at their highest level since June 2024. Though sectors such as accommodation and food services still face high levels of insolvency, analysts hope the World Cup and the potential for a deal between the US and Iran may contribute to an uplift for the hospitality industry in the months ahead.

Despite more hopeful news on company insolvencies, personal insolvencies increased by 2% to 11,223 in May 2026, which was similar to the previous month but 10% higher than May 2025. Breathing Space registrations remained lower than usual (4,817, 38% lower than May 2025) since the largest money advisor group by number of cases updated its suitability criteria in December 2025.

Businesses hold their breath for more change

Whilst these figures tell us how the UK economy fared in the earlier months of 2026, the fast-moving news cycle means we must also look ahead.

June was another eventful month for British politics, with Keir Starmer resigning as Prime Minister. Into his shoes steps Andy Burnham, who is expected to take over as Labour leader on 20 July.

Burnham has presented his ‘Good Growth’ strategy in his first major policy speech, stressing the need for ‘growth in every postcode’. While many have applauded the focus on devolution and regional investment, business groups have raised concerns about the cost. Karim Fatehi OBE, CEO of the London Chamber of Commerce and Industry, pointed out that London generates over a quarter of the UK’s tax receipts, and warned that policy and funding decisions should not be made ‘for political reasons that harm the capital.’ Shevaun Haviland, Director General of the British Chambers of Commerce, echoed the concern, warning that ‘new local business taxes and visitor levies would stifle economic growth.’

Following his exit announcement, Starmer also published the long-awaited Defence Investment Plan, committing £298bn over four years to move UK manufacturing and supply chains toward warfighting readiness. Funding concerns had already prompted the resignation of then defence secretary John Healey, and questions remain over how quickly commitments beyond 2030 will convert into contracts. Still, the industry has broadly welcomed the plan, with ADS Chief Executive Kevin Craven stressing that the priority now is delivery rather than further revision.

Between a new party leader, a shift toward higher defence spending and a war still without resolution, businesses face a summer of watching rather than planning with certainty.

If you are seeking professional advice for your business, Opus is here to help. You can speak to one of our specialists, who can discuss options with you. We have offices nationwide and by contacting us on 0203 995 6380, you will be able to get immediate assistance from our Partner-led team.