"British households are experiencing a sharp slowdown in spending power as the economic shockwaves from the Iran conflict push inflation higher and weaken growth, according to a major new forecast by EY UK."
"The consultancy warned that consumer spending growth is expected to almost stall in 2026, rising by just 0.3pc - a sharp downgrade from the 0.9pc increase forecast before tensions in the Middle East escalated."
"Under a more severe scenario in which disruption in the Strait of Hormuz continues throughout the year, growth could slump to just 0.3pc, the firm warned. The strategically vital shipping route remains central to global energy markets, with fears that prolonged disruption could further drive up oil and gas prices worldwide."
""Energy supply constraints will push inflation higher and delay interest rate cuts, increasing the cost of borrowing for businesses and prompting some companies to reassess spending decisions," he said. The report suggests consumers are increasingly prioritising savings and essentials over discretionary spending, a trend EY believes is beco"
British households face a sharp slowdown in spending power as inflation increases and growth weakens due to economic shockwaves from the Iran conflict. Consumer spending growth is expected to rise only 0.3% in 2026, down from a prior 0.9% forecast. Higher energy costs, persistent inflation, and weaker business confidence are expected to squeeze household finances and corporate investment. EY forecasts UK economic growth of 0.8% this year, with a severe Strait of Hormuz disruption scenario reducing growth to 0.3%. Inflation is forecast to peak at 4% by end-2026, while interest rates are expected to remain at 3.75% for longer. Unemployment could rise to 5.8% as companies cut recruitment amid weaker demand and higher costs.
Read at London Business News | Londonlovesbusiness.com
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