Burnham warned of Iran war impact on UK growth next year
The conflict in the Middle East has pushed up oil and fuel prices, and also disrupted supply chains.
Treasury officials have warned that the UK economy may experience minimal growth in 2027 if tensions in the Strait of Hormuz persist until the end of the year. According to internal modelling shared with Prime Minister and Chancellor John Healey, GDP growth could be as low as 0.3%, significantly lower than the Office for Budget Responsibility's (OBR) projections of 1.6% for 2027.
The conflict between Iran and the United States has already led to increased oil and fuel prices, as well as disruptions in supply chains. Although the UK economy started the year on a strong note, growth has since weakened due to the Middle East conflict. During an official announcement, the actual growth for the April-June quarter will be revealed, with economists expecting a modest 0.4%.
Under the worst-case scenario, where the Strait of Hormuz remains closed for five months and no permanent peace deal between the US and Iran is reached until the new year, the UK economy's growth for 2026 is projected to be 0.9%, slightly below the 1.1% forecast by the OBR in March. Inflation is expected to peak at 4.3% in the first three months of next year, currently at 2.6%, just above the Bank of England's 2% target.
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