UK Economic Growth Slows Amid Iran War Disruptions and High Energy Prices

Official figures released by the Office for National Statistics (ONS) indicate that the UK’s GDP expanded by 0.4% in the three months leading up to June, a decrease from the 0.6% growth recorded in the first quarter. This slowdown aligns with expectations among City economists.

Middle East Conflict and Heatwaves Impact Economy

Analysis suggests that the ongoing Middle East conflict, particularly the disruption caused by the Iran war, is contributing to the economic deceleration. Furthermore, UK heatwaves have reportedly cost the economy an estimated £4.4 billion in lost output so far this year.

Energy Prices Remain a Key Concern

Despite the UK economy demonstrating greater resilience than initially anticipated in the face of the conflict, high energy prices are increasingly impacting growth. Chancellor John Healey is scheduled to present his first budget on October 28th, potentially facing pressure to provide additional support to households this winter due to sustained high energy costs.

Inflation and Potential Interest Rate Hikes

Inflation figures for July, slated for publication next week, are expected to surpass June’s 2.6%, driven by rising utility bills. This sustained high inflation is likely to intensify pressure on the Bank of England to consider further interest rate increases.