UK faces £35bn hit and risk of recession this year over impact of Iran war, thinktank warns
The UK is projected to face a £35 billion economic impact and a risk of recession this year due to the ongoing conflict in Iran. The National Institute of Economic and Social Research (Niesr) has downgraded growth forecasts for 2026 and 2027, citing higher energy costs and inflation pressures. The government is considering a support package as economic confidence declines amid rising borrowing costs.
- ▪Niesr downgraded UK growth forecasts for 2026 to 0.9% and for 2027 to 1%.
- ▪The conflict in the Middle East is expected to lead to higher energy prices, affecting households and businesses.
- ▪The UK government may face a multibillion-pound hole in public finances due to worsening inflation.
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Niesr has downgraded its previous UK growth forecasts for 2026 by 0.5 percentage points, to 0.9%, and by 0.3 percentage points in 2027, to 1%. Photograph: Victoria Jones/PAView image in fullscreenNiesr has downgraded its previous UK growth forecasts for 2026 by 0.5 percentage points, to 0.9%, and by 0.3 percentage points in 2027, to 1%. Photograph: Victoria Jones/PAEconomicsUK faces £35bn hit and risk of recession this year over impact of Iran war, thinktank warnsNiesr says even under best-case scenario, economy would grow at slower pace in 2026 and 2027 because of conflictRichard Partington Senior economics correspondentTue 28 Apr 2026 19.01 EDTLast modified on Tue 28 Apr 2026 21.30 EDTSharePrefer the Guardian on GoogleBritain is facing a £35bn economic hit and the risk of a recession…
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