LONDON, March 27 (Reuters) – Britain’s government and the Bank of England say it is still too early to fully assess the economic impact of the Iran war, but initial signs of strain are emerging-raising concerns for policymakers who have fewer tools to respond than in previous crises.
On Thursday, the Organisation for Economic Co-operation and Development lowered the UK’s 2026 growth forecast by more than for any other major economy, while also increasing its inflation outlook by the largest margin.
The deteriorating outlook puts the Labour government’s key promise at risk-repairing public finances and funding improved public services through stronger economic growth. It also complicates the Bank of England’s efforts to finally bring inflation under control after years of elevated price pressures.
Gas reliance leaves UK exposed
Although the global economy is feeling the effects of the conflict, the UK appears especially vulnerable among major Western nations. Gas prices, which have nearly doubled this month, play a central role in setting electricity costs in Britain-unlike in France, where nuclear energy dominates power generation.
Recent surveys highlight mounting pressure, showing some of the sharpest monthly increases in decades in both public inflation expectations and manufacturers’ input costs. At the same time, consumer confidence has declined.
