The Organisation for Economic Co-operation and Development has warned that the UK economy is being held back by a resurgence of energy inflation, driven by escalating tensions in the Middle East.
In its latest assessment, the OECD urged the British government to accelerate its pro-growth agenda and address persistent regional divides that are exacerbating the impact on household budgets.
The warning comes as the economic aftershocks of the protracted US-Iran conflict begin to materialize across domestic markets.
While the UK’s overall inflation rate remained unchanged in May, that stability was largely due to a broad-based cooling in the cost of groceries and kitchen appliances, which counterbalanced sharp increases in petrol and air fares.
The OECD’s analysis suggests that the underlying pressure from energy costs is now becoming a more dominant drag on growth.
This development adds complexity to the outlook for the Bank of England, which is scheduled to announce its next rate decision on August 6.