Britain is facing mounting fears of stagflation and a possible recession as businesses struggle with soaring energy and transport costs linked to the war involving Iran, alongside recent domestic tax increases. A closely watched survey of services firms showed activity slowing to near standstill, while manufacturing has also slipped back into decline, signalling weakening momentum across the private sector.

Companies reported the sharpest rise in monthly costs for several years, driven largely by higher oil and gas prices. Economists warned that slowing growth combined with rising prices has increased the risk of stagflation, with some predicting the economy could stagnate for the rest of the year and potentially tip into recession if the conflict drags on.

The government has acknowledged significant economic challenges, but critics argue that the economy was already faltering before the conflict began. Recent forecasts suggest Britain will be among the hardest hit advanced economies, with growth expectations cut sharply and inflation projected to rise further, intensifying pressure on households and businesses alike.