ICSM Business News: UK economy put on the skids as the Middle East War threatens hikes in interest rates and energy costs
By Harry Mottram: The omens for the economy are not good as the USA and Israel go to war with Iran setting the Middle East aflame. The Strait of Hormuz is essentially closed with tankers and shipping on either side of the narrow sea passage fearing they'll be attacked. Nautical insurers are not keen on backing shipping lines if there is a prospect of their ships being sunk. Oil to the far east and Asia will hit economies from China to India while in the skies air lines are seeing huge numbers of flights diverted away from the war zone and numerous cancellations. Add to that uncertainty over how long the the war will continue is taking its toll on all things Middle East from hospitality to global energy supplies.
Before the Middle East War broke out things were not exactly rosy with the UK economy said Ian Carrotte of ICSM. He said the latest statement from the Chancellor of the Exchequer Rachel Reeves this week was supposed to given an indication things were at least stable. Instead he said her plans had been blown off course since hikes in oil and gas prices would impact all levels of the economy. He said there is now talk of interest rates rising again to 4% as inflation kicks in from a rise at the pumps of diesel and petrol - which hits distribution, imports and household budgets.
The skids are being put on business in general. The Daily Mail has reported that Online travel agent Loveholidays 'is said to be preparing to delay its £1billion flotation amid the market turmoil' and that Norwegian software firm Visma 'may delay its plans for a £16.5billion float amid a sell-off of software stocks caused by anxiety over the rise of AI rivals.'
The UK’s FTSE 100 share index has lost about 3% of its value in the first few days of the war. Not surprising when 20% of the world’s liquefied natural gas (LNG) and 25% of its oil passes through The Strait of Hormuz. the Islamic Revolutionary Guard Corps said they would fire on any ship trying to pass through causing oil prices to spike at $85 a barrel on Tuesday while the UK wholesale gas prices nearly doubled. At least 6% of UK LNG imports come from Qatar, where the state-owned gas company has halted production with drone attacks accross the Gulf states hitting all levels of business.
Ian Carrotte of ICSM said this was a moment not to panic but to take a look at how businesses could be exposed if the war continues as long as amonth or more. He said: "All bets are off so caution is the watchword - do not extend credit terms or loans if possible as the situation is unpredictable."
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