While the fast-moving news cycle makes it challenging to predict what’s next for British businesses, the latest data captures a snapshot of the UK economy before the first strikes on Iran. Where that had been cause for cautious optimism surrounding interest rate cuts and growth opportunities, the outlook is now less hopeful, with growth falling far short of predictions.

Although the latest data largely predates the developing conflict in the Middle East, it still paints a picture of sluggish growth. The UK economy unexpectedly plateaued in January, core CPI continued to creep up and unemployment among young people reached its highest level in over a decade. While there was positive change in some areas, commentators are increasingly sceptical that the government will be able to meet its ambitious growth targets as this new geopolitical crisis ensues.

It’s highly likely that the economic outlook will be very different by the time the next batch of data comes out. Until then, here are the headline stats from March’s releases.

GDP – January 2026

• UK GDP flatlined in January, with no monthly growth recorded. This falls short of City predictions for 0.2% growth. Largely, this stagnation was attributed to business uncertainty in the wake of the Autumn Budget. The economy may have also been held back by the effects of Storm Goretti and water supply outages in Kent, which forced some businesses to close.
• Over the broader three months to the end of January, real GDP grew by 0.2% following an increase of 0.1% in the three months to December 2025.
• Services output grew by 0.2% after showing no overall growth for the first time in two years in the three months to December 2025. Again, there was no growth in January.
• Production output grew for a second consecutive period, increasing by 1.3% following a growth of 1.2% in the three months to December 2025. Production growth was mostly driven by manufacturing (+1.5%) and electricity, gas, steam and air conditioning supply (+2.2%).
• Overall, the construction sector continued its downward trend. Output fell by 2.0% in the three months to January 2026, following falls of 2.1% in the three months to December and of 0.9% in the three months to November 2025. The largest negative contributor was from the new work sector, which fell by 3.2%.

Inflation – February 2026

• The CPI rate remained unchanged at 3% in the 12 months to February 2026.
• Core CPI (excluding energy, food, alcohol and tobacco) rose by 3.2% in the 12 months to February, up from 3.1% in the 12 months to January. The CPI goods annual rate was unchanged at 1.6%, while the CPI services annual rate fell slightly again from 4.4% to 4.3%.
• Clothing made the largest upward contribution to the monthly change in both CPI and CPIH (CPI including owner occupiers’ housing costs). Motor fuels made the largest downward contribution, with fuel prices falling by 4.6% in the year to February 2026. Prices were collected before the outbreak of war in the Middle East, so it’s likely this trend will reverse in subsequent releases.
• Experts are forecasting that inflation will increase in the wake of the sharp rises in fuel costs on garage forecourts across the UK, the jump in shipping costs and issues with fertiliser and other chemical supply chains — all linked to the escalating conflict surrounding Iran. As a result, the possibility of the Bank of England cutting interest rates this year, as analysts had previously predicted, is slim.

Employment

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

• UK unemployment rates stayed at 5.2% in the three months to January 2026, up in the latest quarter and above estimates of a year ago.
• Younger people are still being hit the hardest by labour market conditions, with unemployment among 18-to-24-year-olds rising to 14.5%, its highest level since 2015.
• In the latest period (November 2025 to January 2026), economic inactivity among the working population aged between 16 and 64 decreased by 0.1% points to 20.7%.
• Vacancy numbers remain broadly flat, though early estimates for December 2025 to February 2026 suggest a decrease of 6,000 (0.8%) to 721,000, compared to 726,000 in the three months to January 2026. Total estimated vacancies were down by 76,000 (9.5%) in December 2025 to February 2026 compared to the same period the previous year.
• Annual regular pay growth fell to 3.8% in the three months to January. This is the slowest rate of wage growth in over five years. Adjusted for inflation, annual growth in real terms was 0.5% for regular pay and 0.7% for total pay.

Insolvencies – February 2026

• There was a 7.4% increase in company insolvencies (1,878) in England and Wales in February 2026 compared to January 2026 (1,749, amended). This rate is 6.8% lower than February of last year, when 2,015 corporate insolvencies were recorded.
• Personal insolvencies were up by 18% YoY, increasing to 11,609 compared to 9,861. This figure includes a record high number of 4,210 debt relief orders, exceeding the previous high of 4,185 in August 2025.
• Bankruptcies were 25% higher than in February 2025, though it’s likely these numbers were affected by the clearing of a backlog following the Insolvency Service moving to a new case management system.

A rocky road ahead for UK businesses

The path forward for British businesses is uncertain as the evolving conflict surrounding Iran, the strait of Hormuz and the Red Sea shipping lanes puts the global economy under strain. While we can hope for a swift resolution to the conflict, the situation has already sent shockwaves through the supply chain that may take years to settle.

The national position is far from ideal, with the OECD warning that the UK faces the biggest hit to growth out of major economies. The UK economy is now predicted to grow by just 0.7% in 2026 – a significant reduction compared to the December 2025 forecast for 1.2% growth.

Experts warn that spiking oil prices, a weakened job market and a contraction in business investment may send us into a mild recession. Higher inflation, increasing mortgage costs and subdued consumer spending will all contribute to a challenging environment for UK businesses, particularly the high number of cash-poor SMEs.

In the latest Mais lecture, the Chancellor outlined the government’s plans to deliver regional funding, AI innovation and improved relations with Europe to support investment-led growth. While these plans were largely well received, the gap between the government’s AI ambitions and the UK’s current infrastructure capacity raises questions about whether those plans can be delivered at pace.

Many people in the UK will now be awaiting the Autumn Budget to hear how the Chancellor plans to rebuild confidence and drive recovery. In the meantime, businesses will be thinking about how geopolitical risks might impact their operations and making plans to make the most of emerging opportunities when conditions stabilise.

If you are seeking professional advice for your business, Opus is here to help. You can speak to one of our Partners, 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.