"Consumer spending growth is now expected to collapse to just 0.3pc in 2026 - barely a third of the 0.9pc previously forecast before the war in the Middle East erupted. The sharp deterioration reflects mounting fears about soaring energy prices, stubborn inflation and weakening confidence as the global economy absorbs another geopolitical shock. Discretionary spending - including retail, hospitality and leisure - is expected to bear the brunt as households divert more income towards essentials and savings."
"EY also slashed its broader growth outlook for Britain, predicting GDP will expand by only 0.8pc this year, down from the 1.3pc previously expected before the conflict intensified. Although growth is forecast to recover modestly to 1.2pc in 2027, the economy would still be weaker than previously expected. The warning adds to a growing chorus of concern about the economic fallout from instability in the Gulf, particularly around the strategically vital Strait of Hormuz, through which roughly a fifth of global oil supplies pass."
"EY warned that if the conflict escalates further and the shipping route remains blocked for the rest of the year, UK growth could fall to just 0.3pc in 2026. Inflation is forecast to climb to 4pc by the end of next year under EY's central scenario, keeping pressure on the Bank of England to delay interest rate cuts. Interest rates are expected to remain stuck at 3.75pc throughout the year, while unemployment is projected to rise to 5.8pc as firms curb hiring amid weaker demand."
"The gloomy assessment comes ahead of official GDP figures expected to show the economy contracted by 0.2pc in March after expanding by 0.5pc in February. Despite the expected monthly decline, economists still believe the economy"
British households are expected to cut spending as a renewed inflation surge, linked to the Iran conflict, strains family finances and pushes the economy toward stagnation. Consumer spending growth is forecast to fall to 0.3% in 2026, down from 0.9% previously expected. Discretionary spending on retail, hospitality, and leisure is expected to weaken as households shift income toward essentials and savings. The broader growth outlook is also reduced, with GDP expected to rise 0.8% this year and 1.2% in 2027. Inflation is projected to reach 4% by the end of next year, keeping interest rates at 3.75% and raising unemployment to 5.8%.
Read at London Business News | Londonlovesbusiness.com
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