Fresh data from the Office for National Statistics (ONS) shows the UK economy grew by 0.5% in February 2026, suggesting a firmer footing at the start of the year. However, business leaders and economists warn that this momentum is under significant threat from escalating tensions in the Middle East and rising operational costs.

The Confederation of British Industry (CBI) noted that while growth exceeded expectations, the broader picture remains subdued. Ben Jones, CBI Senior Lead Economist, cautioned that the recovery was "far from secure" even before the recent geopolitical instability.

Support for Industry

The government has received cautious praise for expanding the British Industrial Competitiveness Scheme. The move provides backdated payments and wider eligibility to help firms manage volatile energy prices.

Anna Leach, Chief Economist at the Institute of Directors (IoD), welcomed the support but warned of the UK’s unique vulnerabilities. "The UK’s tight financing conditions, high initial starting point for inflation, and uncompetitive energy costs make us uniquely vulnerable to the situation," she said. Leach called for a broader rethink of the energy market, including renewable delivery and the role of domestic fossil fuels.

Risks to Households

The outlook for the wider region remains cautious as business confidence slumps and mortgage rates stay high. Experts suggest that as a net energy importer, the UK remains highly exposed to global price shocks.

Kevin Brown, savings expert at Scottish Friendly, said: “February’s positive GDP reading is likely to prove short-lived unless there is a swift resolution to the ongoing conflict in the Middle East... if tensions escalate again, energy prices and borrowing costs will likely soar.”

Calls for Further Action

Business groups are now urging the government to use the tax system to unlock investment and find "workable solutions" regarding the Employment Rights Act. The consensus among analysts is that while the February figures offer a reprieve, the risk of "economic scarring" remains high if global instability persists.