The CBI’s Deputy Chief Economist has assessed how developments between the US and Iran are rattling financial markets and weighing on an already fragile UK economy — with real consequences for households and businesses in Kent.
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If you’ve noticed your energy bills creeping up again or felt that the cost of filling up at the petrol station hasn’t eased as much as you’d hoped, you’re not imagining it. Global events — specifically the diplomatic and economic arrangements between the United States and Iran — are feeding directly into the prices Kent families and businesses pay every day.
What the CBI Is Saying
The Confederation of British Industry posted the analysis on its official account, promoting a piece by Alpesh Paleja, the CBI’s Deputy Chief Economist, under its “New Economy in Brief” commentary series. The post frames Paleja’s work as examining markets’ reaction to the US–Iran memorandum of understanding — a diplomatic or economic arrangement that has sent ripples through global energy markets — alongside a broader look at where the UK economy is heading and the economic challenges facing the current government.
For their part, the picture Paleja paints isn’t a rosy one. The CBI has revised its UK growth forecast down to around 1% for this year, from an earlier estimate of around 1.3%. The Organisation for Economic Co-operation and Development has gone further, cutting its UK growth projection from about 1.3% to just 0.8% for 2026, while forecasting average inflation of around 3.2%. The Office for Budget Responsibility sits somewhere in the middle, projecting real GDP growth of about 1.1% this year, rising gradually to around 1.6% by 2027 and 2028.
A Stagnant Start to 2026
The numbers tell a stark story. UK monthly GDP showed zero growth in January 2026 — the economy, in plain terms, went nowhere. Energy prices surged at the same time, and the CBI links those two facts directly to the tensions surrounding Iran and the volatility they’ve created in global oil and gas markets.
For their part, the Bank of England’s interest rate currently sits at around 3.75%. According to CBI commentary, the Bank is likely to hold rates at that level for longer than many had hoped, given elevated inflation and persistent global pressures. That’s bad news for anyone on a variable-rate mortgage or a business loan tied to the base rate.
Private Sector Confidence Is Falling
It’s not just the headline figures that concern economists. The CBI’s Growth Indicator for June 2026 — based on surveys across manufacturing, services, and distribution — shows private sector activity fell in the three months to June, with a weighted balance of around -34%. Firms then expect activity to fall further still in the three months to September, at a weighted balance of around -28%.
That’s two consecutive quarters of declining business confidence. And it matters, because when businesses pull back on hiring and investment, the effects ripple outward into communities.
The Backdrop for Prime Minister Keir Starmer and the Current Government
Prime Minister Keir Starmer and the current government face a tricky set of books. Weak private sector momentum, tight monetary policy, and global energy shocks don’t make for an easy period in office. Chancellor Rachel Reeves faces a significant growth slowdown, with higher inflation and energy costs further weakening the UK’s prospects, according to CBI commentary.
Alpesh Paleja, Deputy Chief Economist at the CBI, has indicated through the organisation’s analysis that inflation looks set to return to the Bank of England’s 2% target later in 2026 — but the near-term path remains bumpy. The OBR projects unemployment will peak at around 5.3% this year before gradually falling to about 4.1% by 2030. So there’s a medium-term stabilisation in view, but the road there is uneven.
Opposition voices and some independent economists argue the current government needs to go further than the modest growth rates forecast by the OBR and OECD, calling for more proactive industrial and energy policy to shield the UK from external shocks. Whether that happens — and how quickly — will shape the economic weather for years to come.
Why This Hits Kent Hard
Kent’s position as a logistics and commuter county makes it chiefly exposed to exactly this kind of global energy shock. The Port of Dover and the Channel crossings depend on diesel and fuel-intensive operations. Cold-storage facilities, manufacturing sites, and the lorries that run up and down the M2 and M20 every day all face higher operating costs when global oil prices spike. Those costs don’t stay at the port — they get passed on.
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Source: @CBItweets
Key Takeaways
- The CBI has cut its UK growth forecast to around 1% for 2026, with the OECD going lower still at 0.8%, as US–Iran tensions push energy prices higher and weigh on the economy
- UK GDP showed zero growth in January 2026, and CBI surveys show private sector activity falling in the three months to June — with further declines expected through September
- The Bank of England looks set to hold interest rates at around 3.75% for longer than previously anticipated, meaning sustained pressure on mortgage holders and business borrowers
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What This Means for Kent Residents
Higher global energy prices don’t stay abstract for long — they show up in gas and electricity bills, in the cost of a tank of petrol at forecourts across Maidstone, Ashford, and Folkestone, and in the prices local businesses charge when their own costs rise. If you’re on a variable-rate mortgage or a small business owner with a loan tied to the base rate, the prospect of rates staying at around 3.75% for longer is worth factoring into your planning now rather than later. Kent businesses — chiefly those in logistics, manufacturing, or any energy-intensive sector — can seek practical advice and support through the Kent and Medway Growth Hub, which offers guidance on energy efficiency, financing options, and building resilience against exactly these kinds of global shocks. Kent County Council and Locate in Kent also use national forecasts from bodies like the OBR and Bank of England to shape local economic development strategies, so it’s worth keeping an eye on any updated business support schemes that may emerge as the national picture develops.