The UK economy could suffer a £35bn hit and face recession risks due to the Iran war, according to the National Institute of Economic and Social Research (NIESR). The think-tank warned that even in a best-case scenario, growth would slow significantly. David Aikman, NIESR’s director, said: “The Middle East conflict has laid bare the fact that the UK remains highly exposed to global energy shocks.” The report says an adverse scenario could see oil prices reach $140 a barrel, potentially pushing inflation above 5% and prompting the Bank of England to raise interest rates significantly. Under its baseline scenario, NIESR said it expected the Bank to raise interest rates by a quarter-point in July to 4%.

Government borrowing costs have surged to the joint highest level since the 2008 financial crisis, with this driven by rising oil prices and inflation concerns. The yield on the 10-year gilt – a benchmark for a government’s long-term ability to borrow – has surpassed 5% for only the third time since the conflict in Iran began. The UK has experienced the steepest rise in borrowing costs among developed economies, with the two-year gilt yield increasing over 1% since March. Kallum Pickering, chief economist at Peel Hunt, said: “Over the past decade, the UK economy has suffered a succession of policy mistakes and resulting rates of inflation which have consistently exceeded the prevailing trends across other major economies,” adding: “Unsurprisingly, it no longer takes much to spook UK government debt markets.” Analysts warn that the UK’s reliance on oil imports makes it vulnerable to external shocks.

Barclays has revised its growth forecast for the UK, citing rising tax speculation and economic pressures from the conflict in the Middle East. The bank now predicts 1% growth for 2026, down from 1.1%. The bank also lowered its house price growth forecast to 1.9% for this year, reflecting market uncertainty and fears of interest rate hikes. With it noted that Barclays paid nearly £2bn in UK taxes last year, Chief executive CS Venkatakrishnan said banks in the UK are “more highly taxed than they are in any other major jurisdiction.”

The House of Lords’ Economic Affairs Committee has urged Chancellor Rachel Reeves to significantly increase the fiscal buffer against public debt, currently at £22bn. The report, Fortifying the Fiscal Framework, warns that the UK’s debt trajectory is unsustainable. The committee, which has criticised past governments for maintaining low fiscal headroom, says: “Significantly larger buffers must become the norm.” The report calls for stricter adherence to fiscal rules, particularly regarding debt reduction. It also highlights the need for the Government to act independently of the Office for Budget Responsibility’s assessments when implementing beneficial policies.

Global infrastructure spending is projected to exceed $151.1trn by 2050, driven by the need for modernisation in transport, power, and industrial systems. According to PwC, annual spending will rise from $4.4trn in 2024 to $6.9trn by 2050, marking a 57% increase. Annual spending is forecast to rise 1.6 times by 2050 across the US and 1.4 times in Europe.

Savers withdrew £3.9bn in lump sums from defined contribution pensions between October 2024 and October 2025, according to analysis by pension consultancy Broadstone. This was up £868m, or 29%, on the previous 12 months and £1.7bn, or 81%, higher than the same period in 2022 to 2023. The surge was driven by concerns over potential cuts to tax-free cash limits by Chancellor Rachel Reeves. Kelly Parsons from Broadstone said the data “highlights just how sensitive pension savers can be to speculation.” James Carter, head of platform policy at Fidelity International, noted that speculation “can have a real impact on saver behaviour.”

The Government’s retail investment campaign, dubbed Invest for the Future, may fail without tax reform, warns Steven Fine, CEO of Peel Hunt. He argues that the 0.5% stamp duty on shares acts as a “handbrake” on investment, discouraging trading and valuations. Mr Fine suggests that Ms Reeves should phase out the levy to foster a stronger investing culture, commenting: “The Chancellor should use the autumn Budget to begin phasing out stamp duty on share trading, with a clear path to abolition. Start with a cut: send a signal and release the brake.” He added: “If ministers are serious about turning Britain into a nation of investors, they cannot promote share ownership with one hand while taxing it with the other.”

A report from the Greater London Authority highlights that over 1m jobs in London are “highly or significantly exposed” to the impact of AI. Administrative roles are most vulnerable, with 300,000 jobs facing high automation risk. The report indicates that 46% of London’s workforce – approximately 2.4m individuals – could see their tasks automated. Mayor Sir Sadiq Khan is set to tell the Bloomberg CityLab Summit: “I want to be clear that a high degree of exposure to AI does not necessarily mean job losses,” adding that research “indicates there’s every chance that AI will augment and assist” those in such roles, “rather than eliminating their jobs completely.” Noting that 7% of large UK businesses have already used AI to cut staff, he will insist that “we cannot afford to be complacent.”

Most large UK firms lack clarity on how their data is processed by AI systems abroad, raising compliance concerns. A survey by Harbr Data shows that 61% of senior tech leaders at companies worth £100m or more do not fully understand overseas data usage. Nearly 75% reported regular data transfers out of the UK, with a third occurring daily. Anthony Cosgrove, co-founder of Harbr Data, noted the critical nature of AI in business processes. Under UK GDPR, firms must demonstrate data processing transparency, which is increasingly challenging as AI adoption grows.

Lloyds Banking Group saw the highest number of complaints of any financial services business in the second half of 2025, with 187,516 grievances logged with the Financial Conduct Authority (FCA). While its flagship brand, Lloyds Bank, accounted for 90,837 complaints, Bank of Scotland accounted for 79,508. Overall, the financial services sector saw a slight increase in complaints, reaching 1.9m, with this up nearly 1% from H1. The proportion of upheld complaints decreased from 57.9% to 55.5%. FCA data shows that firms paid £236.2m in compensation, down from £283.7m earlier in the year. The City watchdog noted a significant rise in motor insurance complaints, which surged by over a third.

BP’s profits more than doubled to £2.4bn in Q1, driven by rising crude oil prices linked to the conflict in Iran. Chancellor Rachel Reeves said that such substantial profits are precisely why the Government extended the energy profits levy. BP’s chief executive, Meg O’Neill, has said that further taxes on profits linked to the war in Iran would be “a highly flawed response to the situation.” Meanwhile, campaigners including Greenpeace UK have condemned BP for profiting amid rising household energy costs.

After the Supreme Court rejected President Donald Trump’s broad tariffs in February, his administration introduced temporary import taxes but is now looking to replace them with more durable measures before they expire. The US Trade Representative is launching investigations that could justify new tariffs under Section 301 of the Trade Act of 1974. The aim is both to protect domestic manufacturers and restore lost tariff revenue. Although officials say the process is fair, critics argue the outcome is predetermined, with new tariffs intended to replicate those invalidated by the court.