Rachel Reeves urged Labour MPs not to plunge the Government into deeper crisis with a leadership contest against Sir Keir Starmer as official figures showed a surprise 0.6% jump in GDP.
The Chancellor issued her plea as the Office for National Statistics said the UK economy recorded the strongest quarterly growth in a year over the first three months of 2026.
The figures showed a surprise spurt in activity after Donald Trump’s Iran war began.
Gross Domestic Product (GDP) increased by 0.6% between January and March.
This was higher than the 0.5% growth that most economists had been expecting, and marks the highest since the first quarter of 2025.
With Labour in a frenzy over Sir Keir’s future, Ms Reeves said: “Today’s figures show the Government has the right economic plan.”
As Health Secretary Andy Burnham was poised to seek to trigger a leadership contest, the Chancellor added: “Labour MPs have got an important decision to make today.
“But the numbers show that the economy is growing and that when we entered this conflict, our economy was growing strongly because of the decisions that I have made as chancellor, we shouldn’t put that at risk.
“To do so would leave families and business worse off.”
Shadow Chancellor Sir Mel Stride also condemned the “chaos surrounding the Labour leadership” which he stressed was destabilising Britain’s economy.
The Government’s cost of borrowing has risen sharply amid fears that Sir Keir and Ms Reeves could be replaced by more Left-wing politicians at the top of Government.
Former Deputy Prime Minister Angela Rayner is expected to run in a contest if one is triggered, after she said she had been cleared by HMRC over a tax row.
Sir Mel said: “This week, borrowing costs hit their highest level in thirty years as Labour leadership contenders competed to promise even more spending, borrowing and fantasy economics.
“Only the Conservatives have a serious plan to Get Britain Working Again and to fix the public finances through our Golden Economic Rule.”
Greater Manchester Mayor Andy Burnham is seeking to get back into Parliament so he can stand for the Labour leadership but has so far been blocked from being the party’s candidate at a by-election.
The ONS also said GDP increased by 0.3% in March, surprising economists who had been expecting growth to slow following the onset of the war in the Middle East.
ONS director of economic statistics Liz McKeown said: “Growth picked up in the first quarter of the year, led by broad-based increases across the services sector.
“Within that wholesale, computer programming and advertising performed particularly well.
“Production also grew slightly, while construction returned to growth, though only partly reversing weakness at the end of last year.”
Ruth Gregory, deputy chief UK economist, at Capital Economics, said: “GDP rose by a bumper 0.6% in Q1 but this will be the high point for the year given the effects of the war in Iran will sap growth from Q2.
“In our baseline scenario, the economy doesn’t grow at all in Q2 and Q3. Prolonged political instability is an extra downside risk to our forecasts.”
