IoD press release  Stalling UK economy vulnerable to fallout from conflict in the Middle East

“GDP was flat in January, marking a disappointing start to the year. Within services, employment services had a particularly weak month, as a sharp decline in hiring took its toll on the recruitment sector – activity is now down 8% on January 2024. Although consumer services edged up on the month, they were flat on the quarter as confidence to spend remains weak. And while manufacturing continued to recover from the impact of the cyber-attack on JLR last year, auto output is still lower than a year ago, close to 10% down on January 2024. Meanwhile, construction activity remains very weak as regulatory delays and depressed demand continue to drag on housebuilding.

“The outbreak of conflict in the Middle East hits an already troublingly fragile UK economy and sharpens the action needed to lift growth prospects. Energy prices have already risen sharply, and unprecedented damage to supply capacity in the Middle East will have uncertain effects on energy prices longer term. This risks driving up costs for businesses and consumers at a point when inflation was only just heading back to target, and could cause a further slump in confidence and impetus to spend. It is right that the government stands ready to intervene and support the economy once again. But short-term agility must not distract from the UK’s longer term growth needs. From an energy strategy which takes a realistic approach to the transition to net zero, to workers’ rights that avoid overburdening employers, a laser focus on growth is urgently needed.”