UK growth rises, but war-driven inflation threatens to spoil the recovery

Britain’s latest GDP figures suggest the economy has finally stumbled into stronger economic growth, with consumer spending and the services sector helping output exceed expectations. Yet many households are still waiting for the recovery to appear beyond the statistics, as real incomes remain under pressure and consumer confidence stays fragile. Economists are also warning that the momentum may prove short-lived. Rising oil and energy prices linked to the escalating US-Middle East conflict have revived fears of cost-push inflation, which could force central banks to keep interest rates higher for longer — the good news seems unlikely to last beyond the first quarter of 2026...

UK economy sees surprise growth in March despite Iran war - BBC News

1. Explain what is meant by economic growth and describe the recent trend shown in the chart.

2. Assess two reasons why consumers are not confident despite positive economic growth news.

3. Discuss the impact of rising energy costs caused by the US-Middle East war on the profitability of firms such as Europlaz Technologies. Use a cost-revenue diagram in our answer.