Rising costs, slowing growth: How war is hitting the UK economy right now

CREATED BY ROGER EDDOWES Published: 09/04/2026 @ 09:00AM #UKeconomy #energybills #inflation #businessconfidence #economicoutlook

The risks of war to the UK economy are very real; they can quickly impact energy bills, inflation, and business confidence. My blog post today explains why both businesses and households should care, and why a fragile economy makes resilience and planning more important than ever ...

The risks of war to the UK economy are evident, with rising costs and slowing growth

It's very easy to underestimate the risks until they start impacting daily expenses, investor confidence, and economic growth. When conflict pushes up energy prices, as is currently happening due to events in the Middle East, the effects are felt well beyond the battlefield, which is why the country's economic outlook can darken quite rapidly.

One of the most immediate channels is inflation!

If oil, gas, and shipping costs increase, businesses face higher operating expenses, and households pay more to live, which then contributes to broader price rises. That can leave the Bank of England with a tricky decision: support demand or keep rates higher for longer.

There is also a quieter but very real effect on business confidence. Firms tend to delay hiring, investment, and expansion when the impact of the global conflict is unclear, and that hesitation can become self-reinforcing. For companies trying to do proper risk planning, uncertainty is not just inconvenient; it is costly.

These risks also stretch into public finances!

Higher welfare costs, weaker tax receipts, and slower growth can leave the government with less room to manoeuvre. If government spending increases to cushion the shock, taxpayers may end up bearing more of the burden in subsequent years, further straining the system.

Supply chains don't need to be directly affected for the damage to be felt. A conflict that disrupts trade routes, commodity flows, or even insurance markets can impact supply across many sectors, from manufacturing to food production.

This is especially awkward when growth is already fragile, which it currently is. A weak domestic outlook means the country has less capacity to absorb another shock, so what might once have been a temporary inconvenience can turn into a more lasting burden.

For households, the practical outcome
is usually simple enough!

Higher energy costs, a tighter shopping basket, less spending on nights out, takeaways, and entertainment subscriptions, cancelled holidays abroad, and much more uncertainty about mortgages, savings, and wages.

For businesses, that pressure is even greater, as they must plan for demand, funding, staffing, and rising costs simultaneously. Now, business risk planning shifts from a boardroom exercise to an essential survival tool.

The most challenging part is that no battle plan survives contact with the enemy, and war rarely follows a strict timetable. Markets might improve for a while as material costs fall, then shift again with the next headline, retaliation, or supply shock. Oil tankers moving one day do not guarantee they'll be moving the next.

That is why the risks of war to the UK economy cannot be judged by a single day's market movement; they should be regarded as a continuous test of resilience over time.

This isn't just an distant issue unfolding on the global stage. It's already impacting higher energy bills, increased prices, and slower growth here in the UK. Businesses are paying more, households are feeling the pressure, and confidence is beginning to waver.

Government policy must adapt quickly and realistically, or these increased costs won't be temporary; they'll become permanent, leaving us all with consistently higher bills.

Until next time ...

ROGER EDDOWES
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About Roger Eddowes ...
Roger trained at Edward Thomas Peirson & Sons in Market Harborough before working at Hartwell & Co, followed by Chancery, as a partner. He started Essendon Accounts and Tax with Helen Beaumont in 2014 as a general practitioner with a hands-on approach. Roger loves getting his hands dirty, working with emerging, small-to-medium and family businesses to ensure they receive the best possible accountancy advice. Roger utilises an extensive network of business contacts to leverage the best guidance and practical solutions.

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