Iran war is set to cost UK households £2,400 each as it blows a £12bn hole in Britain's public finances

From the Newshound archive · first published 13 October 2026 · last updated 14 October 2026.

Bailey told MPs that bond markets are currently pricing in three rate rises across the coming year — a severe blow to mortgage holders already under pressure.

The war has reportedly blown a near-£12bn hole in Britain's public finances, piling yet more pressure on the Burnham government's pledge to restore 'breathing space' for hard-pressed families.

The Iran war has wiped billions from Britain's public finances and is on course to cost the average UK household £2,400 by the end of 2027, according to new analysis from the Centre for Economics and Business Research. The CEBR calculates real income losses of £1,100 this year and £1,300 next, totalling £70.4bn stripped from UK disposable incomes. Bank of England governor Andrew Bailey warned MPs on Tuesday that inflation risks remain "to the upside" and energy prices "could be higher still."

Inflation has already risen to 2.9%, driven by a 13% jump in energy bills after the Strait of Hormuz closure sent shock waves through global oil markets.