UK households are facing a significant financial hit as the Iran war drives up inflation while wage growth stagnates, according to a new report.
War-driven inflation and stagnant pay
The report, published on Monday, warns that the conflict in Iran has pushed up energy and food prices, adding to the cost-of-living pressures already weighing on families. At the same time, wage growth has failed to keep pace, leaving real incomes under strain.
The analysis highlights that the combination of rising prices and weak pay growth is squeezing household budgets, with the poorest families expected to be hit hardest.
Impact on spending and economic outlook
The report suggests that the financial squeeze could lead to reduced consumer spending, which would in turn slow the broader economic recovery. It also notes that the Bank of England may face a difficult trade-off between tackling inflation and supporting growth.
Economists cited in the report say that without intervention, the gap between earnings and living costs is likely to widen further in the coming months. The full impact on household finances will depend on how long the conflict lasts and how quickly wages respond.
