HM Treasury has warned that UK GDP growth could fall to just 0.3% in 2027 if the Strait of Hormuz disruption persists through the end of 2026, far below the Office for Budget Responsibility's forecast of 1.6%. The modelling assumes the waterway remains closed for five months with no permanent US-Iran peace deal before the new year.
Under the worst-case scenario, growth is projected at 0.9% for 2026, below the OBR's 1.1% estimate, while inflation is expected to peak at 4.3% in the first quarter of 2027, up from 2.6% currently. The economy is expected to grow 0.4% in the second quarter of 2026.
Andy Burnham has announced policies including removing VAT from domestic electricity bills and capping bus fares, while asking Chancellor John Healey to consider further cost-of-living measures ahead of the Budget scheduled for 28 October. Healey has said living costs will be the main focus.