Although it is still early days, it is increasingly likely that the effects of the Gulf crisis will be severe, long-lasting and uneven. Even as UK manufacturers and service firms reported an improvement in their prospects in April PMI data, UK consumers have hunkered down, prioritising savings as confidence fell to the lowest level since October 2023. 

In its latest monetary policy report, the Bank of England (BoE) has published three scenarios rather than a single forecast. Tellingly, the bank’s central scenario – “persistent disruption” – is based on an assumption that the Strait of Hormuz will remain closed until the end of the year, with inflation rising to between 3.5% and 3.7%, and staying higher for longer.

Construction could be exposed to both the uncertainty and economic headwinds associated with the conflict. Output has already been falling since July last year, and the combination of a sharp hike in the cost of borrowing and the unpredictable nature of the conflict could encourage clients to sit and wait.

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