![\"US](\"https:\/\/www.newsbeep.com\/uk\/wp-content\/uploads\/2026\/04\/4_President-Trump-Speaks-In-The-State-Dining-Room-Of-The-White-House-DC-21-Apr-2026.jpg\")
<\/p>\nA former Bank of England rate-setter has spelt out the potential impact of the Middle East conflict on workers and household budgets<\/p>\n
12:38, 22 Apr 2026Updated 14:34, 22 Apr 2026<\/p>\n
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Critics say US President Donald Trump is harming UK households through what has been dubbed “Trumpflation”(Image: Pool\/ABACA\/Shutterstock)<\/p>\n
The Iran war could trigger 150,000 UK job losses and cost the average household \u00a3730, experts have warned. An economic downturn caused by the Middle East conflict<\/a> is forecast to hammer the UK\u2019s already go-slow growth this year and next.<\/p>\n Advisory firm Oxford Economics predicts the hit to firms will mean unemployment grows by 0.5%, or the equivalent of 150,000 jobs. It also warns that inflation will jump to 4.5% this year, up from the 3.3% it reached in March as confirmed by the Office for National Statistics.<\/a> The jump on this scale is much more than the 3.5% peak forecast by the Bank of England<\/a> and a number of other economists.<\/p>\n Michael Saunders, senior advisor at Oxford Economics and a former rate-setter at the Bank of England, said: \u201cEven if the war ended very soon, the outlook for the economy is pretty grim.\u201d<\/p>\n He also warned about the impact on household budgets from soaring fuel and other costs.<\/p>\n \u201cThe average household will be about \u00a3730 a year worse off than we expected at the start of this year,\u201d Mr Saunders told an event organised by think tank the Resolution Foundation. \u201cOf course, it could be worse if the war goes on for longer.\u201d<\/p>\n Former Bank of England rate-setter Michael Saunders says prospects for UK economy are “grim”(Image: PA)<\/p>\n READ MORE: McDonald’s set to raise UK prices due to an Iran war cost shock<\/a>READ MORE: UK Inflation hits 3.3% due to Iran War – what it means for your money<\/a><\/p>\n The concern is around both the immediate impact of the conflict, in terms of higher energy costs and the like, as well as what are called the secondary effects, for instance workers demanding higher wages to offset what they fear will be increasing inflation.<\/p>\n It is this prospect of people\u2019s expectations of higher inflation that the Bank of England will have on its mind when its Monetary Policy Committee meets next Thursday to decide whether to change its base rate, currently at 3.75%.<\/p>\n Mr Saunders predicted the Bank may increase rates to 4.25% later this year, especially if, as it forecasts, inflation reaches 4% by July.<\/p>\n However, other economists are far less certain the Bank will press ahead with any increases. Liz Martins, senior UK economist at HSBC, told the same event she thought inflation was still only likely to rise to around 3.5%.<\/p>\n It came as the Resolution Foundation says an energy shock caused by the Middle East war will cost UK households a combined \u00a311billion this year.<\/p>\n The think tank also warned a deterioration in the Middle East conflict could result in a \u00a316 billion hit to government borrowing by 2029\/30. This would wipe out nearly three-quarters of the headroom Chancellor Rachel Reeves<\/a> built up in her last Budget<\/a>.<\/p>\n Simon Pittaway, its senior economist, said: \u201cNo-one knows which direction the current conflict in the Middle East will take, but we do know that it will make us all poorer. The cost of filling up the car has already increased, and from July, so too will energy bills<\/a>.<\/p>\n \u201cThe conflict is going to make the state poorer too. A deterioration in the conflict that sustains some of the worst hits to the economy could deal a \u00a316 billion hit to the public finances.<\/p>\n![\"Former](\"https:\/\/www.newsbeep.com\/uk\/wp-content\/uploads\/2026\/04\/0_Michael-Saunders-comments.jpg\")
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