UK talking to partners, central bank over economic fallout from Iran, says PM

By Sam Tabahriti and Sarah Young

LONDON, March 9 (Reuters) – The British government is talking to international partners, and its central bank, to assess ways to limit the economic damage from the escalating Iranian crisis, warning that the longer it goes on, the worse it could get.

British borrowing costs have soared since the conflict erupted more than a week ago – by more than those of other European countries and the United States – as investors fear that surging oil and gas prices will stoke already stubborn inflation higher.

That also risks forcing the government to intervene again to cushion the economic blow, a potential huge challenge to an already unpopular government which has limited room to increase spending.

Prime Minister Keir Starmer told an event in London on Monday that he wanted people to know that the government was working to deal with the fallout from the Iranian war.

“What we’re doing is monitoring the risk, working with others to mitigate the risk,” he said.

“The chancellor is talking with the Bank of England every day to make sure that we’re ahead of that, on energy prices for households.”

He also said the government was talking to international partners about how to reduce the likely impact on people in Britain, and said Britain wanted to seek a way to de-escalate the conflict.

Starmer said that he was acutely aware that people would be worried about their bills given the rising oil and gas price, but he noted that for consumers, an existing energy price cap was in place until June.

He also said the economy was more resilient than the last energy shock, when Russia launched its full scale invasion of Ukraine.

“People will sense, you will sense, the longer this goes on, the more likely the potential for an impact on our economy,” he said.

(Reporting by Sam Tabahriti, writing by Sarah Young; Editing by Kate Holton and Michael Holden)