UK Economy Set to Shrink as Iran Energy Shock Hits Growth
EnQuest Bets $833 Million on Malaysia's Offshore Oil CityAM.com is the online presence of City A.M., London's first free daily business newspaper. Both platforms cover financial and business news as well as sport and… The UK economy is expected to contract despite a boost at the start of the year, with economists warning that the war in Iran’s energy price shock will now show up in fresh data.
Economists believe that the UK economydeclinedby 0.1 per cent in April.
Official figures will be published on Friday.
The drop in growth momentum will reflect the late impact of the war in Iran on businesses and consumers, City analysts have said, as political uncertainty around the Labour Party’s leadership could also dampenactivity.
Deutsche Bank’s Sanjay Raja said production and spending would “remain subdued as the energy shock catches up with households and businesses”, adding that there would be “some course correction” on growth across the country.
He added his projection of a small decline in the UK economy could be more optimistic, as firms may pull back on spending by more than expected.
Raja said that official figures last month showing a fall in retail sales by 0.4 per cent would weigh on growth, while the services sector is also likely to decline after a “resounding start to the year”.
Deutsche Bank added that strikes across the London Underground and some rainier weather would have also dampened activity.
A note by Pantheon Macroeconomics said that the health sector could also decline due to doctor strikes in April.
Scheduled resident doctor strikes taking place in June present “another downside risk” to growth forecasts.
Capital Economics analysts said that growth of 0.6 per cent in the first quarter of the year would unwind as firms would stop stockpiling in anticipation of further disruption due to halted trade across theStrait of Hormuz.
Some analysts pencilled in a larger decline in growth due to weaknesses across the retail and communication sectors.
| Product | Price | Change |
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| Nat Gas TTF | $15.42/MMBtu | +0.92% |
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