UK faces £35bn hit and risk of recession this year over impact of Iran war, thinktank warns
The UK faces a £35bn economic hit and a heightened risk of recession in 2026 due to the Iran war's impact on energy prices and inflation, according to the National Institute of Economic and Social Research (Niesr). Growth forecasts for 2026 and 2027 have been downgraded to 0.9% and 1%, respectively, with higher oil prices potentially pushing inflation above 5% and forcing aggressive interest rate hikes. The government may need to provide targeted support to households, but fiscal headroom is shrinking. Niesr warns of lasting economic damage even if the conflict de-escalates soon.
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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 EDTSharePrefer the Guardian on GoogleBritain is facing a £35bn economic hit and the risk of a recession this year as the fallout from the Iran war…
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