The economic fallout from the conflict between the United States and Iran is expected to make next month’s UK budget more difficult, with rising energy costs and inflation adding pressure on households and businesses.
Bridget Phillipson, Labour chair and minister for women and equalities, said the disruption to global oil supplies caused by the conflict was creating significant inflationary pressures that would present additional challenges for Chancellor John Healey as he prepares the October budget.
Phillipson said the UK economy remained in a strong position, pointing to recent growth figures, but acknowledged that the Middle East conflict was having direct consequences for families and businesses.
The rise in global energy costs has become a particular concern for governments as disruptions to oil supplies threaten to push up fuel, transport and other business costs.
Phillipson said the UK government had deliberately chosen not to become involved in the conflict between the US and Iran, arguing that the decision was appropriate for Britain’s national interests.
Despite the disagreement over the war, she said the relationship between Britain and the United States remained important and should not be defined by differences between individual political leaders.
Prime Minister Andy Burnham is expected to meet US President Donald Trump at the United Nations General Assembly summit in New York early next week.
The meeting comes despite comments Burnham made about Trump while serving as mayor of Greater Manchester. Burnham had previously said Trump would not be welcome in the city and criticised British politicians who supported the US president.
Phillipson played down the significance of those earlier remarks, saying politicians frequently express different views and that such disagreements do not prevent governments from maintaining strong international relationships.
She said the UK-US relationship extended beyond any single president or prime minister and that Britain’s national interest remained the central consideration.
The economic pressures created by the conflict come as the UK government prepares to set out its financial plans for the coming year.
The budget is expected to face close scrutiny over the cost of living, government spending and measures aimed at supporting households as inflation continues to put pressure on family finances.
Phillipson said tackling the cost of living remained a major priority for the government and that the chancellor would need to consider the additional pressures facing households and businesses when preparing the budget.
The conflict’s effect on global oil markets has added another layer of uncertainty to those calculations, particularly because sustained increases in energy prices can feed into inflation and raise operating costs across the economy.
The UK government will therefore enter the budget period facing both domestic economic pressures and the wider consequences of instability in the Middle East.
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