"If energy prices stay around current levels, another bout of stagflation looks likely, with growth slipping to around 0.5% this year. If energy prices move even higher, in a similar way to 2022 a recession looks more likely, given the weaker labour market and tighter starting point for monetary and fiscal policy."
"Official figures from the Office for National Statistics revealed that GDP growth was zero, contrasting with economists' expectations of a 0.2% increase. This weaker-than-expected data has increased fears that rising fuel and energy costs, driven by the conflict involving the US, Israel, and Iran, could derail the fragile UK economy."
"The Office for Budget Responsibility warned that sustained energy price rises could push UK inflation up by an additional 1 percentage point, potentially reaching around 3% by the end of the year. The fiscal watchdog had already cut its 2025 growth forecast to 1.1%, down from 1.4%, even before the escalation in the Middle East."
Britain's economy unexpectedly flatlined in January with zero GDP growth, falling short of economists' 0.2% forecast. This weak performance follows sluggish 0.1% growth in the final quarter of the previous year. Rising fuel and energy costs driven by Middle East conflict threaten economic recovery. The Office for Budget Responsibility warned that sustained energy price increases could add 1 percentage point to inflation, potentially reaching 3% by year-end, and cut 2025 growth forecasts to 1.1%. Economists warn that prolonged conflict and sustained oil price spikes could trigger economic contraction by 2026, with stagflation or recession risks increasing if energy prices remain elevated or rise further.
#uk-economic-growth #energy-prices-and-inflation #middle-east-conflict-impact #recession-risk #stagflation
Read at London Business News | Londonlovesbusiness.com
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