Stay up to date with notifications from The Independent

Notifications can be managed in browser preferences.

All

News

Sport

Culture

Lifestyle

The UK has been warned it faces a recession in the second half of the year (Getty/iStock)

The energy crisis resulting from the Iran war could reduce the UK economy by £35bn, even in an optimistic scenario, according to the National Institute of Economic and Social Research (Niesr).

Niesr warns that a prolonged conflict in the Middle East could plunge the UK into recession during the latter half of this year.

David Aikman, Niesr's director, described the forecasts as a “serious blow” to the government's economic growth ambitions, highlighting the UK's exposure to global energy shocks.

The Bank of England is anticipated to raise interest rates, with Niesr predicting a rise to 4% in July, potentially reaching 5.25% if inflationary pressures from the conflict continue.

Economic growth forecasts have been downgraded, and inflation is expected to peak at 4.1% in…