Britain’s economy is likely to contract in 2027 if the Strait of Hormuz does not reopen to shipping before the middle of next year, according to forecasters at accountants EY, who issued the warning on Monday.
The outlook underscores the UK’s vulnerability to prolonged disruptions in global energy supply chains.
EY slightly adjusted its growth forecast for 2026, revising it to 0.9percent from 0.8percent, based on the assumption that the Strait reopens by the end of September.
Under this baseline scenario, the firm expects economic growth to reach 1.2percent in 2027.
However, EY cautioned that the risks remain significant. “If the Strait of Hormuz reopens in the coming months, we expect the UK to avoid a more pronounced downturn, but an extended closure into 2027 would raise inflation and could push the economy into contraction next year,” said Peter Arnold, EY UK Chief Economist.
Also Read: Japan, EU Finalize Horizon Europe Association
In a more adverse scenario where the Strait remains closed until early to mid-2027, EY forecasts that UK growth would slow to 0.5percent in 2026, followed by a contraction of 0.2percent in 2027. Inflationary pressures would also intensify, with consumer price growth expected to rise to 6.4percent by the end of 2026. This compares with a more moderate peak of 3.5percent this year if the Strait reopens within the next few months.
Also Read: Shell Reports $9.84 Billion Q2 Profit on Rising Oil and Gas Prices
Recent projections from the Bank of England present a somewhat more resilient outlook.
Even under an adverse scenario in which oil and gas prices remain 30percent to 60percent higher than current market expectations, the central bank still anticipates economic growth of close to 1percent next year, with quarterly inflation peaking at around 4.5percent.
Also Read: China Eyes Faster Europe Rail Freight in New Five-Year Plan
EY expects the Bank of England to hold interest rates steady this year before implementing cuts in 2027, reducing rates from 3.75percent to 3.25percent, with anticipated moves in April and July.