- EY's latest economic outlook warns that Britain's economy could enter a recession next year if the crucial Strait of Hormuz remains closed until early or mid-2027.
- Under this adverse scenario, GDP could grow by just 0.5 per cent this year and contract by 0.2 per cent next year, with inflation potentially soaring to 6.4 per cent by the end of 2026.
- Conversely, if the Strait of Hormuz reopens by the end of the third quarter of this year, EY's base case forecasts resilient growth, upgrading the 2026 outlook to 0.9 per cent expansion.
- The report also anticipates interest rates remaining at 3.75 per cent until late 2026, with two cuts expected in April and July 2027, bringing the rate to 3.25 per cent by the end of 2027.
- Peter Arnold, EY UK chief economist, highlighted the UK economy's unexpected resilience but cautioned that prolonged disruption to global energy markets would test this strength.
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