UK Economy 'At Risk of Recession' Next Year Amid Strait of Hormuz Disruption

The UK economy is at risk of recession next year if the Strait of Hormuz disruption continues beyond mid-2027, according to a report by EY.

The report warns that if the Middle East conflict persists and the vital waterway remains shut until early or mid-2027, GDP could grow by just 0.5 per cent this year and contract by 0.2 per cent next year.

Inflation is expected to soar to 6.4 per cent by the end of 2026 due to surging oil and energy prices, the report cautions.

However, if the Strait of Hormuz reopens by the end of the third quarter of this year, EY's base case forecast suggests growth will remain fairly resilient, with GDP expansion upgraded from 0.8 per cent to 0.9 per cent in 2026 and maintained at 1.2 per cent in 2027.

Peter Arnold, EY UK chief economist, said: 'The UK economy has proved more resilient than many expected this year, prompting a modest upgrade to our growth forecast.'