Iran War to Drain £70 Billion from UK Households
UK households face a significant economic hit due to the ongoing conflict in Iran. According to a new analysis by the Centre for Economics and Business Research (CEBR), the war could wipe £70.4 billion from UK households' real disposable incomes. This translates to an average financial loss of £2,400 per household by the end of 2027.
The CEBR estimates that inflation and weaker wage growth will reduce the average household's real income by around £1,100 in 2026, followed by a further £1,300 in 2027. The economic consultancy notes that the conflict has two main channels: direct and indirect. Directly, higher energy costs feed into bills and prices, reducing purchasing power. Indirectly, monetary policy and labour market impacts also affect households.
The current energy price cap change is set to add £60 to a typical bill in October, even after factoring in VAT cuts on electricity. This comes as inflation has already risen to 2.9% in July due to higher global oil prices. The Bank of England may be forced to raise interest rates from 3.75% to 4% by December to combat inflation.
CEBR senior economist Liam Daly warns that the squeeze on households will persist until energy markets calm. He notes that a conflict thousands of miles away continues to affect UK households, eroding real income through higher bills and reduced purchasing power.