{"id":246796,"date":"2026-08-12T22:17:17","date_gmt":"2026-08-12T22:17:17","guid":{"rendered":"https:\/\/www.europesays.com\/iran\/246796\/"},"modified":"2026-08-12T22:17:17","modified_gmt":"2026-08-12T22:17:17","slug":"iran-war-threatens-to-crush-uk-economy-treasury-officials-warn-growth-could-slow-to-just-0-3","status":"publish","type":"post","link":"https:\/\/www.europesays.com\/iran\/246796\/","title":{"rendered":"Iran war threatens to crush UK economy: Treasury officials warn growth could slow to just 0.3%"},"content":{"rendered":"

By HUGO DUNCAN, BUSINESS EDITOR<\/a> <\/p>\n

Updated: 17:00 EDT, 12 August 2026 <\/p>\n

Andy Burnham has been warned that the UK economy will grind to a halt if Donald Trump presses on with his war on Iran \u2013 just as repeated heatwaves hit output.<\/p>\n

Treasury officials predict growth will slow to 0.3 per cent in 2027 if the Strait of Hormuz remains effectively closed for the rest of this year due to the conflict.<\/p>\n

That would be the worst performance since 2023, when Britain was in the grip of a cost-of-living shock following Russia\u2019s invasion of Ukraine, and well below the 1.6\u00a0per cent expansion that has been forecast by the Office for Budget<\/a> Responsibility.<\/p>\n

The internal forecast also warns inflation<\/a> could rise from 2.6\u00a0per cent to 4.3\u00a0per cent in the first quarter of 2027, hitting living standards.<\/p>\n

The Treasury briefing, reported by Bloomberg, came as Iran and the US remain at loggerheads over a permanent end to the war in the Gulf.<\/p>\n

And it represents a major headache for Burnham and his Chancellor John Healey ahead of a Budget in October that analysts warn could see \u00a325billion of tax hikes to fund lavish spending plans.<\/p>\n

\"\" <\/p>\n

Iran war: The latest growth predictions represent a major headache for Andy Burnham and his Chancellor John Healey (pictured)<\/p>\n

Any slowdown \u2013 such as the one outlined by Treasury officials \u2013 would blow a fresh hole in public finances as tax receipts fall and welfare payments rise.<\/p>\n

And surging inflation would undermine the Government\u2019s efforts to help households with the cost of living.<\/p>\n

Official figures today are expected to show growth slowed in the second quarter of the year, following an expansion of 0.6\u00a0per cent in the first three months.<\/p>\n

It is feared the economy ground to a halt in June, with no growth, raising the prospect of a painful bout of \u2018stagflation\u2019 and further undermining the claims of ex-Chancellor Rachel Reeves to have left Britain on a firm footing.<\/p>\n

Burnham and Healey have also been warned that heatwaves are taking a toll as productivity tumbles, high street sales wilt, and drought damages harvests and threatens food shortages.<\/p>\n

Martin Beck, an economist at WPI Strategy, estimated the hot weather has cost the UK economy around \u00a33billion, while green think-tank Verdant put the figure at \u00a34.4billion.<\/p>\n

The oil price remained close to $90 a barrel last night amid disruption to shipping through the Strait of Hormuz, through which a fifth of global oil and gas supplies passed before the war.<\/p>\n

And the International Energy Agency yesterday warned global stockpiles of oil were \u2018rapidly depleting\u2019 due to the conflict.<\/p>\n

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