Friday 12 June 2026 7:13 am
| Updated:
Friday 12 June 2026 7:19 am
Rachel Reeves is facing a battle to keep the UK economy afloat.
The UK economy lost momentum in April, official data has revealed, as the energy price shock from the Iran war took its toll on businesses and consumers. The Office for National Statistics said GDP declined by 0.1 per cent in April. The services sector contracted by 0.2 per cent while manufacturing output did not post any growth. Construction, however, recovered slightly as growth in the sector was 0.1 per cent. Over a three-month period, growth was 0.7 per cent, building on momentum built in the first quarter of the year.“Services were again the driver [over three months] with a particular strength in computer programming, marketing and wholesale companies across the three months, while construction showed some further signs of recovery after a weak winter,” said Liz McKeown, director of economic statistics at the ONS.The data shows how early disruption in international trade across the Strait of Hormuz after the Iran war began in March has affected UK households and firms. Economists have said that the UK economy is still set to suffer a larger hit as the delayed effects of trade disruption will show up in data later this year. Inflation is also expected to rise as the Iran war drags on, adding to fears that interest rates could be hiked. The Bank of England is set to meet again next year and take another assessment on the likelihood of inflation spiking this year. Tensions have re-escalated in recent days despite hopes of a peace deal being struck between parties, with Iran sending missiles into Israel and the US targeting Iran’s critical infrastructure. World economy to slow to lowest growth since pandemicThe global economy is also set to slow to its lowest growth rate since the pandemic as a result of the energy price shock that has sent oil prices above $90 per barrel. The World Bank said on Thursday that global growth was forecast to come to 2.5 per cent, lower than the 2.9 per cent mark for 2025. World Bank president Ajay Banga said that developing countries other than China and India would suffer the largest consequences as they will have “collectively experienced nearly a decade of no progress on narrowing their per capita income gap with advanced economies”. The United Nations organisation also said that economies in Europe, Central Asia and the Middle East would grow at a lower rate than those in sub-Saharan Africa and Latin America. The low growth figures across the UK economy and the rest of the world will likely concern Treasury officials who are already in a tussle with other government departments over tight budgets. Growth in the first quarter of the year was estimated at 0.6 per cent though some of the gains are expected to be unwound due to global conflicts. On Thursday, John Healey resigned from government as he blamed Sir Keir Starmer and Rachel Reeves for failing to provide enough funding to defence.
