UK households could face an average £2,400 hit to their finances by the end of 2027 as the economic fallout from the Iran war pushes up inflation and weakens wage growth, new analysis has warned.
According to the Centre for Economics and Business Research (CEBR), the impact will reduce the average household’s real income by around £1,100 in 2026, followed by a further £1,300 in 2027.
For convenience store owners, the squeeze could put further pressure on already cautious shoppers, as higher household costs leave consumers with less disposable income for non-essential purchases.
The economic consultancy estimates that the Middle East conflict will ultimately wipe £70.4bn from UK households’ real disposable incomes.
The analysis comes as the conflict continues to feed through into inflation, with higher energy and other costs adding to pressure on household budgets and potentially making consumers more price-conscious.
“Higher energy costs feed straight into bills and into the price of almost everything else, so each pound of pay buys less,” explained the CEBR senior economist, Liam Daly.
“The indirect channel is slower but as important, running through monetary policy and the labour market.
“A conflict fought thousands of miles away continues to bear on UK households, with real income erosion felt in the weekly shop, at the pump and on the energy bill. Until energy markets calm, the squeeze will persist,” Daly said.
Energy bills across Great Britain are scheduled to rise in October, after the regulator, Ofgem, decided to lift its quarterly price cap by 4%.
Last week, the Energy and Climate Intelligence Unit thinktank (ECIU) calculated that higher wholesale oil and gas prices since the start of the US-Iran war, on 28 February, will add an estimated £9.8bn to UK energy and road transport costs. UK gas and electricity users face paying an extra £190m for each week the conflict continues, the ECIU found.