Recession warning: UK economy weak even before Iran war as Labour branded 'economically naive and ignorant'

The damning assessment comes as fresh data reveals the UK economy was already struggling before the Iran conflict pushed the country towards an economic downturn.

Official figures show Britain's economy had flatlined between June last year and January, with output failing to grow during that seven-month period.

Clive Black, an analyst at Shore Capital, warned: "An economically naive, ignorant and at times stupid UK Government will soon be blaming international affairs for a potential recession that exposes its poor policymaking."

Fresh figures from S&P Global paint a grim picture of Britain's services sector, with activity plummeting to an 11-month low of 50.5 last month.

The reading sits precariously above the crucial 50 threshold that distinguishes expansion from contraction, prompting warnings that the economic outlook is "darkening."

Service sector businesses experienced their steepest monthly surge in costs since 2021, driven by escalating oil and gas prices that have sent energy and transport expenses soaring.

Manufacturing has fared no better, with S&P reporting last week that production costs are climbing at their fastest rate since the Black Wednesday crisis of 1992.

The composite index tracking both services and manufacturing dropped to a six-month low of 50.3, indicating only marginal growth in private sector output.

The Organisation for Economic Cooperation and Development has delivered a stark warning that Britain will suffer more severely than any other major advanced economy from the conflict.

The international body cut its UK growth projection for this year by 0.5 percentage points to a mere 0.7 per cent, whilst simultaneously raising its inflation forecast by 1.5 percentage points to 4 per cent.

Both revisions represent the largest downgrades among all G7 nations, which include the United States, Canada, Japan, Germany, France and Italy.

These global pressures arrive as households and businesses are already reeling from £75 billion in tax increases implemented since Labour took office.

Companies face additional burdens from above-inflation minimum wage rises and the government's overhaul of employment rights.

Conservative business spokesman Andrew Griffith said: "The Chancellor must not hide behind global events when her own actions including new costs and red tape on jobs kicking in today mean the UK is worse affected than others."

Thomas Pugh, chief economist at RSM UK, said: "The inevitable conclusion is that the UK is in for another bout of stagflation, even if the conflict ends soon. If it drags on longer, a recession looks likely."

He added: "The inevitable impact of soaring energy prices will be slower growth. We now expect the economy to stagnate for the rest of this year as higher energy prices and tighter financial conditions cause disposable income to shrink."

RSM UK now anticipates growth of approximately 0.5 per cent this year, with a significant probability of recession depending on energy price movements.

S&P economics director Tim Moore noted that "stagflation risks appear to have increased" as prices climb sharply alongside weakening growth.

Matt Swannell, chief economic adviser to the EY Item Club, said: "The outlook for growth across the rest of this year is darkening."