UK households to lose an average of 2,400 in real income by the end of 2027 by way of war involving Iran driving up energy prices, pushing inflation and dragging back wages, research said.
The Centre for Economics and Business Research analysis said the average UK household would be poorer by 1,100 in 2026 and 1,300 the following year. The war will cut the combined real income of UK households by a total of 70.4 billion.
The conflict is sending energy prices higher with ships unable to navigate the Strait of Hormuz, a situation that translates through to electricity and gas bills as well as food, transport and other items.
“The first is direct: higher energy costs feed straight into bills and into the price of almost everything else, so each pound of pay buys less,” said Liam Daly, senior economist at the think tank.
“The indirect channel is slower but as important, running through monetary policy and the labour market,” Daly said. The Bank of England has kept the cost of borrowing high amid worries over a return of rampant inflation, having previously been forecast to lower the cost of borrowing again by now.
Meanwhile, the energy regulator Ofgem is about to lift the energy price cap to add another 4% to the typical household’s bill in October, with the conflict adding approximately 190 million to UK energy and transport costs every week, according to estimates by the Energy and Climate Intelligence Unit research and advocacy group.
