British economy shrinks as Iran war dampens growth
Britain’s economy contracted 0.1 per cent in April, its first monthly decline since August 2025, as the Iran war dealt a blow to the British entertainment industry when it canceled Formula 1 Grand Prix races and other sporting events in the Gulf.
Data from the Office for National Statistics (ONS) on Friday showed the first clear signs of the impact of the US-Israeli war on Iran for Britain’s economic growth.
It fell by 0.2 percent in April, driven by production, management and support services in the dominant services sector, as well as the arts, entertainment and recreation sectors.
An ONS official said there were reports that the cancellation of sporting events in the Middle East was affecting relevant British firms.
The outbreak of war resulted in the cancellation of the Formula 1 Grand Prix races scheduled for April in Bahrain and Saudi Arabia.
Tennis and football events were also cancelled.
Thomas Pugh, chief economist at tax and consultancy firm RSM, said the outlook would worsen.
“Higher energy prices and borrowing costs, as well as a period of renewed political uncertainty, are likely to combine to bring growth to a near halt for the rest of the year,” Pugh said, adding that the data reinforced sentiment that the Bank of England would keep interest rates steady next Thursday.
Investors showed little reaction to Friday’s numbers; Sterling remained steady and is fully priced in for November, with financial markets continuing to price in only a small possibility of a rate hike in June.
Responding to the ONS data, Chancellor of the Exchequer Rachel Reeves said the war in Iran would affect the economy but her plan was correct.
Manufacturing production increased 0.4 percent in April; This increase helped offset a bad month for the services sector, helped by an increase in pharmaceutical production, which often fluctuates widely.
Construction output also increased modestly.
Overall economic output in the three months to April was 0.7 percent higher than the previous three months, as economists had expected.
Separate trade data showed the value of fuel imports rose to Stg7.1 billion ($13.5 billion) in April; this was the highest reading in three years; this reflects both the rise in oil prices following the outbreak of war and the UK’s high dependence on imported energy.
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