"The war in Iran and the resulting blockade of the Strait of Hormuz will tear a £35 billion hole in UK output over the next two years, push consumer price inflation back above 4 per cent, and force the Bank of England to raise interest rates rather than cut them."
"Should the conflict drag on and oil spike to £140, the damage doubles to £68 billion, and Threadneedle Street may be forced into the steepest emergency tightening since Black Wednesday in September 1992."
"Niesr has cut its UK growth forecast for 2026 to 0.9 per cent, down from the 1.4 per cent it pencilled in as recently as February."
"Annual consumer price inflation, currently drifting back towards target, is forecast to climb to 4.1 per cent at the start of 2027."
Britain's small and medium-sized businesses are facing renewed inflationary pressures due to the conflict in Iran, which could significantly impact UK output. The National Institute of Economic and Social Research forecasts a potential £35 billion loss in output over two years, with inflation rising above 4 percent. If oil prices spike, the economic damage could double. Growth forecasts for 2026 have been reduced, and consumer spending power is expected to decline, leading to a flatlining economy. The Bank of England may need to raise interest rates in response to rising inflation.
Read at Business Matters
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