{"id":246606,"date":"2026-08-12T19:22:38","date_gmt":"2026-08-12T19:22:38","guid":{"rendered":"https:\/\/www.europesays.com\/iran\/246606\/"},"modified":"2026-08-12T19:22:38","modified_gmt":"2026-08-12T19:22:38","slug":"iran-war-threatens-to-cripple-growth-treasury-warns-andy-burnham","status":"publish","type":"post","link":"https:\/\/www.europesays.com\/iran\/246606\/","title":{"rendered":"Iran war threatens to cripple growth, Treasury warns Andy Burnham"},"content":{"rendered":"

Official growth figures on Thursday are expected to show that growth slowed to 0.4pc in the second quarter of the year, down from 0.6pc at the start of 2026. Analysts at Rabobank said momentum \u201chad started to wane into the middle of the year\u201d.<\/p>\n

The private Treasury forecasts handed to Mr Burnham and Mr Healey also estimated that inflation could rise as high as 4.3pc as surging oil prices feed through into household energy bills, up from the current rate of 2.6pc.<\/p>\n

Such a surge would threaten to critically undermine the Prime Minister\u2019s promise to tackle the cost of living crisis<\/a>.<\/p>\n

Bloomberg reported the Treasury\u2019s economic forecasts were based on the Strait of Hormuz remaining effectively closed for five more months. They were also based on no lasting peace deal being reached until next year.<\/p>\n

Mr Trump said on Wednesday that the United States had \u201ctotal control\u201d over Hormuz. However, the president has made similar claims for weeks and Iran also claims to have control of the crucial waterway.<\/p>\n

Oil prices edged closer to $90 a barrel on Wednesday amid ongoing strikes in the Gulf, while the International Energy Agency warned oil stockpiles were \u201crapidly depleting\u201d with the Strait of Hormuz all but impassable.<\/p>\n

If the strait remains effectively closed for the rest of the year, Treasury economists warned that growth this year would be just 0.9pc \u2013 lower than the official OBR forecast of 1.1pc \u2013 and 0.3pc next year.<\/p>\n

Rising prices are already hitting households struggling with the cost of living. Higher prices will also pile more pressure on public spending<\/a> and pay rises, with annual increases in benefits usually tied to inflation.<\/p>\n

While Mr Healey inherited a near-\u00a324bn buffer from Rachel Reeves, his predecessor, to meet tax and spending rules, the Resolution Foundation has previously warned the economic impact of the Iran war has reduced this headroom to around \u00a310bn.<\/p>\n

Meanwhile, Mr Burnham has also made a succession of expensive policy promises since replacing Sir Keir Starmer.<\/p>\n

The Prime Minister has pledged to launch the largest council house-building programme in decades, overhaul social care and raise defence spending.<\/p>\n

Mr Healey will also have to find around \u00a34.7bn in the Budget to fund extra defence spending, amounting to about \u00a31.2bn per year.<\/p>\n

Capital Economics has warned households to brace for a war on wealth in October, claiming that the Prime Minister could target entrepreneurs and pensioners.<\/p>\n

The Treasury declined to comment.<\/p>\n

However, Mr Healey insisted last month that he was committed to balancing the books and keeping Britons safe.<\/p>\n

He said: \u201cFiscal credibility is the bedrock, not just of economic stability, which many economists argue, but it\u2019s the bedrock of our national security as well. A country that can\u2019t pay its way, can\u2019t defend itself.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"Official growth figures on Thursday are expected to show that growth slowed to 0.4pc in the second quarter…\n","protected":false},"author":2,"featured_media":246607,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":"","_share_on_mastodon":"0"},"categories":[3],"tags":[46517,328,147,34,196,274,101,4560,2059],"class_list":["post-246606","post","type-post","status-publish","format-standard","has-post-thumbnail","category-iran","tag-andy-burnham","tag-business","tag-economy","tag-iran","tag-iran-war","tag-standard","tag-strait-of-hormuz","tag-top-story","tag-uk-economy"],"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@iran\/117084169451479563","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/iran\/wp-json\/wp\/v2\/posts\/246606","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/iran\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/iran\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/iran\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/iran\/wp-json\/wp\/v2\/comments?post=246606"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/iran\/wp-json\/wp\/v2\/posts\/246606\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/iran\/wp-json\/wp\/v2\/media\/246607"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/iran\/wp-json\/wp\/v2\/media?parent=246606"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/iran\/wp-json\/wp\/v2\/categories?post=246606"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/iran\/wp-json\/wp\/v2\/tags?post=246606"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}