Andy Burnham has been warned that the UK economy could grow as low as 0.3% in 2027 if disruption in the Strait of Hormuz continues until the end of 2026, according to Treasury modelling presented to him and Chancellor John Healey. The scenario assumes a worst-case closure of the Strait for five months and no permanent US-Iran peace deal by next year. Under this projection, inflation would peak at 4.3% in early 2027, up from its current 2.6%. Burnham has hinted at further support to ease financial burdens on households and businesses, which could be included in the upcoming Budget on October 28.
Written by the local model on 2026-08-14,
using this article's own text rather than the other coverage of the
same event (that is the story summary below).
Story summary
Andy Burnham, the new Prime Minister of the UK, has been warned that the country's economy could barely grow next year if tensions with Iran continue until the end of 2026. The warning comes from internal modeling presented to Burnham and Chancellor John Healey, which suggests that UK GDP growth could be as low as 0.3% in 2027. The economic disruption is due to the conflict in the Middle East, which has pushed up oil and fuel prices and disrupted supply chains. This scenario is a "reasonable worst-case" one, where the Strait of Hormuz remains closed for five more months, and no permanent peace deal between the US and Iran is reached until next year. Economists are expecting growth of 0.4% in the current quarter, but even this could be threatened if tensions with Iran escalate further. The UK economy had a strong start to the year, but faltered due to the conflict in the Middle East.
Written for “UK-Iran War Warning” on 2026-08-31,
grounded in this article and the 0 other(s) covering the same event.
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Leaning score -0.35 for article 778 (medium confidence, 1 verified quote) · logged 2026-08-26
- Published
Andy Burnham has been warned that the UK economy could barely grow next year if disruption in the Strait of Hormuz continues until the end of 2026.
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disruption → publish → 2026
Treasury sources have confirmed that internal modelling presented to the new prime minister and chancellor suggests UK GDP growth could be as low as 0.3% in 2027, as first reported by Bloomberg.
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growth → confirm → Bloomberg
Government officials say they routinely plan for all possible scenarios.
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they → say → scenarios
The UK economy saw a strong start to the year, but growth then faltered with the conflict in the Middle East affecting some businesses.
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conflict → see → businesses
The Iran war has pushed up oil and fuel prices, and also disrupted supply chains.
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war → push → chains
On Thursday, official figures will show how much the economy grew between April and June of this year.
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economy → show → year
Economists are expecting growth of 0.4% for the three months.
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Economists → expect → months
Burnham and Chancellor John Healey were presented with a reasonable worst-case scenario of the Strait of Hormuz remaining effectively closed for the next five months, and no permanent US-Iran peace deal until the new year.
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Strait → present → year
The Treasury modelling for that scenario was that the UK economy would grow by 0.9% over 2026 - slightly under the 1.1% forecast by the Office for Budget Responsibility (OBR) in March.
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economy → grow → March
The prospect was much dimmer for next year, with just 0.3% growth projected - much lower than the OBR's 1.6% forecast for 2027.
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growth → project → 2027
Under the modelling, inflation would peak at 4.3% in the first three months of next year.
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inflation → peak → year
It currently stands at 2.6%, just above the Bank of England's 2% target.
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It → stand → target
The prime minister and chancellor will face pressure to use the upcoming Budget on 28 October to ease the financial burden on households and businesses.
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minister → face → households
Since taking office three weeks ago, Burnham has announced policies including the removal of VAT from domestic electricity bills and bringing forward an already planned end to "subscription traps".
But this week he told the BBC's Wake up to Money the announcements, aimed at tackling the cost of living, are not enough on their own, hinting at further support.
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announcements → take → support
He has asked Healey to look at what more the government can do on the cost of living in the Budget, with the chancellor saying it will be his "main focus".
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it → ask → Budget
But Healey has said he will oversee "strong fiscal discipline" – which will limit how much the government has to spend.
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government → say → much
Burnham has said his government will stick to the party's 2024 manifesto pledges not to increase people's income tax, VAT or National Insurance contributions.
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government → say → contributions
He also promised to follow the fiscal rules imposed by former Chancellor Rachel Reeves, which include a pledge to balance day-to-day spending with tax revenues by the end of the decade.
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which → promise → decade
