UK Economy Faces 0.3% Growth Forecast Amid Ongoing Middle East Disruption

Treasury modelling presented to UK Prime Minister Andy Burnham and Chancellor John Healey suggests a worst-case scenario for the economy could see growth as low as 0.3% in 2027, due to ongoing disruption in the Strait of Hormuz.

The modelling assumes that the Strait remains closed until the end of 2026 and no permanent US-Iran peace deal is reached by next year.

This scenario would see inflation peak at 4.3% in the first three months of 2027, surpassing the Bank of England's 2% target. Current inflation stands at 2.6%

The government has been warned that this disruption could significantly impact UK growth, with Treasury sources confirming internal modelling presented to the new prime minister and chancellor.