{"id":120401,"date":"2026-05-12T11:15:00","date_gmt":"2026-05-12T10:15:00","guid":{"rendered":"https:\/\/en.econostrum.info\/uk\/?p=120401"},"modified":"2026-05-12T10:46:05","modified_gmt":"2026-05-12T09:46:05","slug":"uk-growth-downgraded-consumer-confidence","status":"publish","type":"post","link":"https:\/\/en.econostrum.info\/uk\/uk-growth-downgraded-consumer-confidence\/","title":{"rendered":"UK Growth Downgraded Again as Middle East Tensions Hit Consumer Confidence"},"content":{"rendered":"\n

The UK economy is facing another period of weak growth after the conflict involving Iran triggered fresh concerns over inflation, energy supplies, and household finances. A new assessment from EY <\/strong>suggests consumer spending growth in Britain could nearly stop this year as rising prices continue to pressure families and businesses.<\/p>\n\n\n\n

According to EY\u2019s latest economic outlook, spending by UK households is forecast to increase by just 0.3 percent<\/strong> in 2026. The projection marks a downgrade from the 0.9 percent growth expected before tensions escalated in the Middle East. The report also warned that sectors tied closely to discretionary spending may face sustained pressure as consumers prioritize savings and essential purchases.<\/p>\n\n\n\n

The findings arrive as economists monitor the broader impact of geopolitical instability on the British economy. EY said higher energy costs linked to disruptions in the Middle East are expected to feed through into inflation, affecting borrowing costs, employment, and investment decisions across multiple industries.<\/p>\n\n\n\n

At the same time, concerns remain focused on the Strait of Hormuz<\/strong>, a strategic shipping route through which around one-fifth of the world\u2019s oil and gas supply passes. According to the report, a prolonged disruption to the route could weaken economic growth even further during the remainder of 2026.<\/p>\n\n\n\n

Consumer Spending Weakens as Inflation Pressures Households<\/strong><\/h2>\n\n\n\n

EY\u2019s central forecast estimates that UK economic growth will slow to 0.8 percent this year, compared with the 1.3 percent trajectory expected before the outbreak of hostilities. The consultancy also forecasts growth of 1.2 percent i<\/strong>n 2027, below its earlier expectation of 1.4 percent.<\/p>\n\n\n\n

According to EY chief economist Peter Arnold<\/a>, the UK economy had started 2026 on relatively stable footing before the conflict added new external pressures. He said the country is once again dealing with an economic shock tied to international instability, particularly through energy markets and inflation.<\/p>\n\n\n\n

The report forecasts inflation could reach four percent by the end of the year under its baseline scenario. EY believes this would lead the Bank of England to hold interest rates at 3.75 percent <\/strong>throughout 2026 rather than moving toward cuts.<\/p>\n\n\n\n

Household behavior also appears to be changing over a longer period. Arnold said cautious consumer spending patterns that emerged after the pandemic are now looking more permanent across income groups. According to his assessment, households are increasingly directing money toward savings and essential expenses instead of non-essential purchases. That trend is expected to affect businesses dependent on consumer demand, including retailers, hospitality firms, and companies linked to leisure and events.<\/p>\n\n\n\n

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UK consumer spending growth is forecast to slow sharply as rising inflation linked to the Iran war squeezes household finances, according to EY.

Spending growth for 2026 is now predicted at just 0.3%, down from 0.9% before the conflict.

EY warns inflation could hit 4%,\u2026 pic.twitter.com\/D2LhFZwhdM<\/a><\/p>— Radio News Hub (@radionewshub) May 12, 2026<\/a><\/blockquote>