The UK economy contracted by 0.1% in April, according to official figures, as the conflict with Iran began to take its toll on growth. The downturn, driven by higher energy prices after Iran closed the Strait of Hormuz, followed a 0.3% rise in March.
The Office for National Statistics reported that the fall in gross domestic product was led by a 0.2% decline in services output, partly offset by a 0.1% rise in construction. The arts, entertainment and recreation sector was particularly affected, with the cancellation of multiple sporting events in the Middle East impacting UK-based businesses.
Chancellor Rachel Reeves said the economy was strong before the conflict, adding: 'This is not a war we wanted or joined, but one that will have an impact at home.' She argued that her choices had put the economy in a stronger position to deal with the costs of the war.
Over the three months to April, GDP growth was 0.7%, but economists warned of a slowdown. Fergus Jimenez-England of the National Institute of Economic and Social Research said higher energy costs would feed through, with the impact likely to be felt most acutely in the third quarter as the energy price cap rises.
Thomas Pugh of RSM UK said underlying growth would slow even if a deal is reached in Iran, citing higher energy prices, borrowing costs and political uncertainty. The Bank of England is due to decide on interest rates next week, balancing higher inflation against the risk of choking off weak growth.
