The message from Rachel Reeves is clear. After Britain’s economy defied the predictions for a slump in March, despite the fallout from the Iran war, why put things at risk with a roll of the dice in domestic politics?

Responding to bumper growth of 0.3% in March – much stronger than City economists’ forecasts for a 0.2% contraction – the chancellor said the figures showed she had the right economic plan, in a comment laced with subtext.

Over the first three months of 2026, the economy grew by 0.6%, up sharply from growth of 0.1% in the final three months of last year. At that pace Britain is now the fastest growing economy in the G7.

“Now is not the time to put our economic stability at risk. To do so would leave families and business worse off. Instead, this government is getting on with the job of building an economy that is stronger, more resilient, and prepared for the future,” Reeves said.

The fighting talk could easily be directed at Labour’s external critics. After Keir Starmer’s two years in power, the government has struggled to show much progress on its top priority of growing the economy.

However, the message also works for an internal audience. On another dramatic day in Westminster, as Wes Streeting and Angela Rayner prepare leadership bids, the undertone is none too subtle: if it ain’t broke, why fix it?

For Reeves, the progress in the first quarter could bolster her case to remain as chancellor with whoever occupies No 10 after the dust settles on Labour infighting. The talk among City bond traders reflects this, in the anticipation that Reeves’s reputation for fiscal prudence could help to calm a storm in the gilt market.

However, despite a bumper first quarter, the pressure on Reeves and Labour is unlikely to abate.

For several years the UK has recorded bumper growth in the first quarter, only to see activity fizzle out as the year progresses. Most economists predict a far weaker performance, over the second half of the year – with several warning that the fallout from the Middle East conflict could risk tipping Britain into recession.

Faced with rekindling inflationary pressures, the Bank of England is poised to increase interest rates – adding to the pressure on mortgage borrowers and businesses grappling with other rising costs.

As the Middle East conflict continues, households in Britain still reeling from the cost of living crisis are facing a renewed hit from spiralling energy prices. Despite a promise of targeted financial support, Reeves has done little yet to cushion the blow, while warning that costly interventions are unaffordable.

The Resolution Foundation predicts the Iran war will damage typical household incomes by £550 this year, and increase government borrowing by £16bn by the end of the decade. At a time of rising borrowing costs, high inflation, and elevated government debt levels, a change in tax and spending policy to offer support will be tough.

The challenge for whoever occupies Downing Street will be to navigate this precarious backdrop.