UK economy shrinks by 0.1 per cent as Iran war impact felt

The UK economy shrank slightly in April as the Iran conflict drove up the price of fuel, according to new figures released today.

However, on a three-monthly basis, the economy grew by 0.7 per cent – demonstrating the resilience of firms, business leaders said.

Gross domestic product (GDP) - a measure of everything produced in the economy - contracted 0.1 per cent in April according to data from the Office for National Statistics (ONS).

Initially, in the first month of attacks between the US and Israel and Iran, GDP rose faster than expected, potentially impacted by companies' reaction to the Iran war-related supply disruption.

From February to April, the economy grew 0.7 per cent, marking the fifth consecutive period of three-monthly growth.

But the April contraction came as diesel prices reached their Iran war peak. In the same period, petrol prices also soared.

And by April, some oil and wholesale gas reserves had been depleted, and purchasers were having to pay high prices as the Strait of Hormuz waterway was effectively shut.

Ruth Fleet (pictured), senior policy advisor at Greater Birmingham Chambers of Commerce, said: “The three-month view of GDP to April shows that businesses remain resilient in the face of current national and geopolitical challenges - but looking at April alone we see a slight contraction in GDP.

“Businesses are reporting the pressures they are facing around rising energy and material costs as a consequence of the US-Iran conflict, as many brace for longer-term impacts.

“For example, 43 per cent of respondents to our recent surveying told us that they anticipate their energy costs to rise between 20 per cent and 100 per cent in the next year.

“Government needs to take decisive action to lower the cost of doing business to give firms the space they need to thrive and drive our economy.”

A panel of business experts will discuss navigating global uncertainty at Greater Birmingham Chambers of Commerce’s next Quarterly Business Report launch event, taking place at Birmingham City University on Tuesday 7 July.