UK economy grew faster than expected in March

The UK's economy grew faster than expected in March, despite the month seeing the first impact of the Iran war.

The economy grew by 0.3% in the month, official figures show, confounding analysts' forecasts of a small contraction.

Across the first three months of the year growth was 0.6%, the Office for National Statistics (ONS) said, led by a rebound in areas such as retailing and construction.

However, analysts expect growth to weaken in the months ahead as the impact of the Iran conflict continues to filter through to the economy.

Economists had expected the economy to shrink in March as fuel prices rose due to the closure of the Strait of Hormuz.

The ONS said retailers had reported that motorists were stocking up on fuel as prices rose sharply.

Some economists said the March figures pointed to signs of so-called "front loading", suggesting that businesses and consumers were bringing forward activity ahead of expected shortages in supply or price increases, including in car sales and rentals.

The ONS said the boost to the services sector in the first three months of the year was driven in particular by strong performance in wholesale, computer programming and advertising.

Liz McKeown, the ONS's director of economic statistics, said the construction industry had also returned to growth, "though only partly reversing weakness at the end of last year".

Chancellor Rachel Reeves told the BBC that she would set out more support for families and businesses affected by the war next week.

"The economy is growing strongly, and because of that growth we'll be able to do more to invest in our public services and to support families and businesses with the cost of living," she said.

But in a reference to the current speculation about the prime minister's position, Reeves said: "We shouldn't put [economic stability] at risk by plunging the country into chaos at a time when there is conflict in the world but also at a time when our plan to grow the economy is starting to bear fruit."

Shadow chancellor Mel Stride said Labour said the "chaos surrounding the Labour leadership is destabilising Britain's economy".

"This week, borrowing costs hit their highest level in 30 years as Labour leadership contenders competed to promise even more spending, borrowing and fantasy economics."

Yael Selfin, KPMG's chief economist, said the impact of the Iran war on the economy was likely to be more pronounced in the second quarter of the year.

"Households are under renewed pressure as energy and petrol prices climb. Food costs are also expected to rise, with disruptions to fertilisers and other essential inputs," she said.