The latest warning from the International Monetary Fund delivers an uncomfortable truth: among the world’s advanced economies, the United Kingdom is set to bear the brunt of the current energy crisis triggered by the Iran war.
Growth forecasts have been sharply downgraded, with the UK now expected to expand by just 0.8% this year—a significant drop from earlier projections. It is the steepest revision among its peers, placing Britain in an increasingly vulnerable տնտեսական position at a time when resilience is most needed.
The причины are structural as much as they are immediate. As a net importer of energy, the UK is particularly exposed to global price shocks. When oil and gas prices surge—as they have following disruptions in the Strait of Hormuz—the impact feeds quickly into domestic costs, from household energy bills to business operations.
This vulnerability is compounded by monetary constraints. With inflationary pressures rising, central banks face a delicate balancing act. The IMF’s caution against aggressive interest rate hikes reflects a broader concern: tightening too quickly could further suppress already weak growth, yet failing to act risks allowing inflation to spiral.
The UK’s predicament illustrates a broader challenge facing energy-dependent economies. Unlike exporters who may benefit from higher prices, importers absorb the shock directly. The result is slower growth, strained public finances, and চাপ on consumers already grappling with the cost of living.
Yet the outlook is not entirely bleak. The IMF expects the UK to regain momentum next year, potentially emerging as the fastest-growing economy within the G7 in Europe—albeit at a modest pace. This projected recovery suggests that while the current shock is severe, it may not be permanent.
Still, that optimism hinges on factors largely beyond Britain’s control. The duration of the conflict, the stability of global energy supply, and the trajectory of inflation will all determine whether recovery materializes—or stalls.
What this moment ultimately reveals is the fragility of economic planning in an interconnected world. Domestic policy can cushion the blow, but it cannot fully shield against external shocks of this magnitude.
For the UK, the lesson is clear: energy security is not just a стратегический concern—it is an economic necessity. Until that vulnerability is addressed, the country will remain exposed to crises that begin far beyond its borders but are felt sharply at home.
The government has a key target to be the fastest-growing economy in the G7 by the end of this parliament.
The UK is also forecast to have the joint-highest inflation in the G7 this year, at 3.2%, and next year, at 2.4%. alongside the US in 2026 and Italy in 2027.
The IMF said UK inflation was expected to pick up “temporarily” this year and head towards 4%, but then return to the Bank of England’s target rate of 2% by the end of 2027 as the impact of higher energy prices fades and a worsening jobs market leads to slower wage growth.
Responding to the IMF’s forecast, Chancellor Rachel Reeves said: “The war in Iran is not our war, but it will come at a cost to the UK. These are not costs I wanted, but they are costs we will have to respond to.
“We entered this conflict in a stronger position because of the choices this government took to build economic stability, but there is more to do.”
However, US Treasury Secretary Scott Bessent told the BBC a “small bit of economic pain for weeks” was worth it for the security of eliminating the risk of Iran deploying nuclear weapons.
“I wonder what the hit to global GDP would be if a nuclear weapon hit London…I am saying that I am less concerned about short term forecasts, for long term security,” he said.
The war had removed this “tail risk” of Iran using such a weapon, he added.
Shadow chancellor Sir Mel Stride said Reeves had “no one to blame but herself” for the size of the IMF’s downgrade, after increases to employers’ National Insurance and business rates.
“Her ‘plan’ to keep costs down has left us with the highest inflation in the G7, with businesses closing and the cost of living skyrocketing,” he added.
Liberal Democrat Treasury spokesperson Daisy Cooper said the downgrade was an “indictment of Trump’s idiotic war and all those who cheered it on – including Reform and the Conservatives”.
“[Prime Minister Sir Keir] Starmer’s latest flurry of stern words directed at the US President are worthless if there is no plan to protect people from Trump’s economic vandalism,” she said.
The UK government has been urged to step in and help people through measures such as cutting fuel duty to help keep pump prices down.
But IMF chief economist Pierre-Olivier Gourinchas said countries including the UK should be “very cautious” about introducing assistance programmes.
He told the BBC that despite government work to rebuild financial buffers the UK had much less room to move now, due to the war.
“There isn’t really a lot of room to go and spend in order to support households and businesses,” he said.
If the UK were to bring in support measures, he said it should “stay within the envelope” of current government spending.
Inflation in the UK was 3% in the year to February, which is higher than the Bank of England’s target. Some analysts believe the Bank could raise interest rates later this year.
However, in its outlook, the IMF cautioned central banks against raising interest rates too prematurely.
“Reacting strongly to flexible commodity prices, when supply constraints are present only in the related sectors, brings down inflation fast but risks a recession later,” it said.
The IMF has put in a significant level of caution on its forecast given the uncertainty of events in the Gulf. Its numbers rely on a relatively fast resolution to the conflict by the second half of the year.
The Fund pointed out that before the war it had expected to upgrade economic prospects, as US President Donald Trump’s trade tariffs were now lower than planned, and China, Europe and Canada had simply traded more with each other to make up for US declines.
But now, the IMF said “the global economy is threatened with being thrown off course”.
The economies of many Gulf nations such as Iran, Iraq, Qatar and Bahrain are expected to contract this year.
In more severe scenarios, with the oil price averaging $110 a barrel and $125 next year, and energy prices and interest rates continuing to rise, a global recession would be a “close call”.
