Stories

Fri, 12 Jun 2026

Fri, 12 Jun 2026 UK economy contracts as Iran war impact felt

The economy shrank slightly in April as the Iran war began to have an impact on businesses, official data shows.

* The contraction was driven mainly by a 0.2% fall in the services sector, which accounts for about three-quarters of the UK's economy.
* Areas such as arts and entertainment, sports activities, and amusement and recreation activities were particularly hard hit due to cancelled events in the Middle East affecting UK-based businesses.
* Some manufacturing, transport, and travel businesses also saw their trading affected by the Iran war.
* The ONS said that some of the fall can be attributed to the effects from the conflict in the Middle East.
* The economy grew by 0.7% over the three months to April compared with the previous three-month period.
* The Iran war has led to a surge in crude oil prices, causing petrol and diesel prices to rise in the UK and household energy bills to increase in July when the energy price cap rises.
* Economists expect the Bank of England to keep interest rates unchanged when it meets next week, but may raise them later in the year due to inflation concerns.