Hormuz Closure Looms Over UK Economy Growth

UK economy growth is uncertain due to the ongoing closure of the Strait of Hormuz, which could lead to recession if it remains shut until mid-2027. Forecasters at accountants EY warn that an extended closure would cause inflation to rise and push the economy into contraction next year.

EY's UK Chief Economist Peter Arnold stated that 'if the Strait of Hormuz reopens in the coming months, we expect the UK to avoid a more pronounced downturn.' However, if it remains closed, growth this year will slow to 0.5%, and the economy will shrink by 0.2% in 2027.

Inflation is predicted to peak at 6.4% by the end of 2026 under this scenario, compared to a lower peak of 3.5% if the Strait reopens soon. The Bank of England's forecasts also suggest growth next year, but with higher oil and gas prices.