Iran War Threat Could Halt UK Economic Growth, EY Warns

Analysts at EY have warned that a war between Iran and the US could 'halt growth' in the UK economy, citing prolonged energy price disruption as a major concern. The Big Four consultancy has revised its growth forecast up to 0.9 per cent for this year, but notes that baseline forecasts hinge on the opening of the Strait of Hormuz, allowing critical goods and oil supplies to leave the Gulf region.

In an adverse scenario where energy price disruption continues into the middle of 2027, EY analysts predict growth would slow to 0.5 per cent this year and contract by 0.2 per cent next year. Inflation is expected to remain at around 3.5 per cent by the end of the year, but could reach as high as 6.4 per cent in a prolonged disruption scenario.

UK Chancellor John Healey admitted that the government 'can't completely stop the squeeze' faced by businesses and families over the coming months, while EY's chief economist Peter Arnold noted that recent volatility in oil and gas prices would once again 'test' the country's resilience to shocks. Construction remains a concern due to rising costs, which have increased by more than 30 per cent since 2019.