The UK is grappling with the growing threat of a looming recession amid a turbulent geopolitical landscape and energy shocks arising from the US-Iran conflict.
According to the report prepared by EY Item Club, in the wake of the Iran conflict, around 250,000 people could lose their jobs by mid-2027 as “Britain slips into recession.”
At the heart of these concerns are oil shocks, rising energy prices and food insecurity in the UK.
According to an independent forecaster and reported by sky News, Inflationary pressures, which are already being felt on fuel prices, are expected to spill over into supply chains in the coming months. As a result, there will be a massive loss of spending power.
Ultimately, the UK economy will decline further in the second and third quarters of this year, putting the country at risk of recession.
Britain’s growth rate is projected to halve from 1.4 percent in 2025 to 0.7 percent this year, dealing a blow to better-than-expected GDP growth in February.
According to EY Item Club, the unemployment rate in the UK is projected to reach 5.8 percent by mid-2027, up from a five-year high of 5.2 percent due to the crisis in the Middle East.
Despite inflation being projected to rise to 4 percent this year from the current 3% level, the report predicts the Bank of England will not need to intervene further.
This suggests that the current bank rate of 3.75 per cent is already restrictive enough to manage price growth in 2026.
“Consumers’ spending power will wane, while more expensive financing arrangements and a less certain global economic backdrop will pour cold water on companies’ investment plans,” said Matt Swannell, chief economic adviser at Item Club.
Apart from this, IMF and OECD have also issued strict warnings regarding Britain’s economy. According to their forecasts, the UK economy will be the most affected among industrialized countries.
Given the worrying economic situation, Chancellor Rachel Reeves has called a meeting of bank chiefs to iron out the potential fallout.
