The EU is preparing for a “stagflationary shock” of low growth and rising inflation, according to Valdis Dombrovskis, the EU economy commissioner. He indicated that the European Commission will likely revise its growth forecast downwards due to the ongoing uncertainty from the Middle East conflict. Current estimates suggest growth could slow by up to 0.6% this year and next, while inflation may rise by as much as 1.5%. Dombrovskis stressed the need for temporary, targeted measures to avoid a fiscal crisis, saying: “We have more limited room for fiscal manoeuvre than we used to have.” The Commission will update its GDP forecast in May.

Kristalina Georgieva, the managing director of the International Monetary Fund (IMF), has warned that the ongoing Iran war will have lasting effects on the global economy. In a speech ahead of the IMF’s annual spring meetings in Washington next week, she stated that even the most optimistic scenario would result in a growth downgrade. The IMF’s upcoming World Economic Outlook report will show a permanent decline in living standards due to infrastructure damage and supply disruptions. Georgieva urged governments to avoid unilateral actions that could worsen the situation, stressing the need for targeted support for vulnerable households. “Growth will be slower – even if the new peace is durable,” she said.

The Bank of England’s latest Credit Conditions Survey reveals that loan defaults have risen to 6.2% in early 2026, the highest since late 2024. Unsecured lending defaults hit 18.6% in Q1 this year, the highest figure since the last quarter of 2023. Karim Haji, Global and UK Head of Financial Services at KPMG, said: “Rising default rates show that underlying pressure is building. The impact of the prolonged conflict on fuel prices is adding new pressure on household finances, and the full impact of higher costs and mortgage rates is still feeding through.” The ongoing conflict in the Middle East is raising costs, leading to concerns about future defaults. Raj Abrol, CEO of Galytix, warned that rising mortgage rates could add £1,000 annually to typical loans.

London’s stock market listings significantly declined in early 2026, with only two initial public offerings (IPOs) recorded in the first quarter, according to EY-Parthenon. IForex raised £8.8m on the main market, while Halo Minerals debuted on the Alternative Investment Market. Geopolitical tensions, particularly the conflict in the Middle East, have dampened investor confidence and affected valuations in technology sectors. Scott McCubbin, EY-Parthenon’s IPO leader, commented: “The UK listings pipeline remains robust… continue progressing your IPO readiness.” Despite current challenges, experts anticipate a rebound later in the year.

Top economists have urged the Chancellor to initiate a comprehensive review of the UK tax system to enhance growth and investment. A report from the OECD recommends broadening the VAT base and addressing inefficiencies in current tax reliefs. It highlights the outdated property tax valuations and the £100,000-125,000 tax trap as significant issues. The report also criticises the Government’s handling of business relations and suggests extending liability for violations to post-public activities. Rachel Reeves has been called to act before the upcoming Budget amid economic challenges.

OpenAI has paused its Stargate UK project, citing high energy costs and regulatory uncertainty. The decision impacts the planned data centre in the North East, part of a £31bn investment in the UK by US tech firms. Ed Miliband, the Energy Secretary, faces criticism over his Net Zero agenda, with Conservative MP Andrew Griffith, saying: “Ed Miliband’s suicidal energy policy has just cost us another huge investment.” OpenAI expressed potential for the UK’s AI future but stressed the need for better conditions for long-term investment.

Andrew Bailey, the Bank of England governor, has warned that hidden “lemons” in the private credit industry could erode investor confidence, reminiscent of the 2008 financial crisis. Speaking to the European Parliament, he highlighted the risks of undisclosed bad loans. Bailey said: “If you start to observe more lemons… do you start to lose confidence in the whole thing?” He noted that private credit funds are facing increased scrutiny and withdrawal demands due to market volatility caused by the war in the Middle East and concerns over asset quality.

The Fair Work Agency has gained significant powers under the new Employment Rights Act, allowing enforcement officers to enter business premises without delay. City AM points out that new documents show that companies cannot request legal advice to postpone inspections unless they provide a clear reason. Patrick Milnes from the British Chambers of Commerce stresses the need for collaboration with businesses, stating: “A heavy-handed approach to punishing non-compliance will only deter firms from seeking out the help they need.” This was echoed by the Federation of Small Businesses’ policy chair Tina McKenzie who also called for “clear guidance and open channels of communication.”

HMRC has issued a warning to individuals considering accessing their private pension pots, advising them to “check before you dip.” The tax authority cautioned that some schemes could lead to unexpected tax liabilities, potentially resulting in owing 100% of the tax due, plus interest and penalties. HMRC highlighted that workers should be wary of receiving more money in their bank accounts than what appears on their payslips, as this may indicate improper tax deductions. “The longer you leave it the bigger the tax bill,” HMRC stated, urging vigilance among workers.