Arabic version: انكماش الاقتصاد البريطاني بسبب تأثير حرب إيران على الأعمال

The UK economy shrank slightly in April, contracting by 0.1% as the Iran war began to have an impact on businesses, official data has indicated. According to BBC News, firms have reported increased costs and a decline in turnover linked to the conflict in the Middle East.

April’s contraction was the first monthly fall since August last year, but had been forecast by economists after stronger than expected growth in March. The Office for National Statistics (ONS) indicated that the economy grew by 0.7% over the three months leading up to April, but analysts predict a slowdown in the upcoming months. The Bank of England is expected to keep interest rates unchanged when it meets next week.

Particularly affected areas within the services sector included arts and entertainment, sports activities, and amusement and recreation activities, as the war led to the cancellation of multiple events in the region. Additionally, some manufacturing industries, wholesale, warehousing, and support activities for transportation reported reduced turnover due to the conflict.

Chancellor of the Exchequer Rachel Reeves acknowledged the war’s impact on the UK economy, asserting that her decisions as Chancellor have positioned the economy to better handle the conflict’s costs. The Iran war has also led to the effective closure of the Strait of Hormuz, a key shipping route for oil tankers, causing a surge in crude oil prices and subsequent increases in petrol and diesel costs in the UK.

Economists have expressed concerns about the fragility of the UK economy, with rising energy bills expected to further strain household finances. As consumers prepare for these increases, they are signaling a tendency to cut back on purchases and increase their savings, which could negatively impact economic activity. Meanwhile, businesses face mounting costs but struggle to pass these on to consumers, potentially squeezing profit margins. Analysts predict that while the Bank of England may consider raising interest rates later in the year, the current economic weakness suggests rates will remain unchanged for now.