The UK is reeling from the growing threat of an upcoming recession in the midst of turbulent geopolitical landscape and energy shocks driven by US-Iran conflict.
According to the report prepared by the EY Item Club, in the wake of the Iran conflict, around 250,000 people could lose their jobs by the middle of 2027 as “Britain flirts with recession.”
At the heart of these concerns lies the fallout which is brought upon Britain by oil shocks, surging energy prices and fears of food insecurity.
According to an independent forecaster and reported by the Sky News, the inflationary pressure, already being felt at the fuel prices, is expected to spread across supply chains in the coming months. Consequently, the spending power will suffer widely.
Eventually, the UK economy will further plunge in the second and third quarters of this year, pushing the country towards the risk of recession.
Britain’s growth is projected to halve from 1.4 percent in 2025 to 0.7 percent this year, giving a blow to February’s better-than-expected rise in GDP.
According to EY Item Club, the unemployment rate in the UK is anticipated to hit 5.8 percent by mid-2027, up from the five-year high of 5.2 percent due to the crisis in the Middle East.
Despite forecasting inflation to peak at 4 percent this year, up from its current 3% level, the report predicts that the Bank of England will not need to intervene further.
It suggests that the current Bank rate of 3.75 percent is already sufficiently restrictive to manage price growth throughout 2026.
Matt Swannell, chief economic adviser to the Item Club, said, “Consumers’ spending power will be squeezed, while more expensive financing arrangements and a less certain global economic backdrop will pour cold water on companies’ investment plans.”
Moreover, the IMF and OECD also issued a dire warning regarding the UK’s economy. As per their forecasts, the UK economy will be the hardest and worst hit among industrialised nations.
Given the concerning economic situation, the Chancellor Rachel Reeves, has summoned the meeting of bank chiefs aiming to ward off the potential fallout.
