Tariffs on Iranian oil imports have been in place for weeks. But the domestic cost of a conflict most Britons cannot name is now landing on the shop floor. The price of wheat has surged by 30 percent since airstrikes deepened the Strait of Hormuz blockade. Bakers in Manchester tell me their flour costs have doubled. A loaf that cost £1.20 in January is now £1.80. And that is just the start.
The Bank of England revised its growth forecast downwards this morning. GDP contraction for the second quarter is now expected at 1.5 percent. That is twice the warning issued just three months ago. The culprit is a broken supply chain. Iranian crude oil made up 12 percent of UK refinery inputs. That supply is now gone. Petrol at the pump has risen above £2.10 a litre. But it is not just fuel. Iranian pistachios, carpets and petrochemicals have vanished from the shelves. More crucially, the disruption has frozen trade routes through the Suez Canal. Container shipping costs from Asia have tripled. Every imported good from electronics to clothing now carries a war premium.
But the real story is not on the high street. It is in the housing estates and ex-mining towns where I grew up. The UK unemployment rate is expected to climb to 5.5 percent by autumn. That is 200,000 jobs lost. The hardest hit sectors are manufacturing and logistics. Factories in the West Midlands are running on three day weeks. A warehouse in Rotherham has laid off 40 workers because the parts for the conveyor belts are stuck on a ship off the coast of Yemen. The union Unite has reported a 30 percent rise in requests for redundancy support.
The government response has been a fiscal squeeze. The Chancellor announced a cut in public spending by 2 percent across all departments except defence. That means fewer Sure Start centres, longer NHS waiting lists and council tax bills that will rise 4.5 percent in real terms. For a family on minimum wage in Newcastle, that is another £200 a year out of a tight budget. Meanwhile, the energy price cap is expected to rise by £400 a year in October. The UK is now importing liquefied natural gas from the United States at twice the cost of the Russian pipeline gas it replaced.
I spoke to Margaret, a retired shop worker in Bolton. Her pension has not risen in line with inflation. She is skipping meals. “I never thought I’d see rationing again,” she said. “But I’m buying half the bread I used to. The rest goes to the birds.”
There is a deeper crisis here. The UK economy is heavily service based but its physical infrastructure is fragile. The war has exposed the extent to which we rely on just in time deliveries. Port capacity is at 95 percent. There is no strategic stockpile of grain or oil. The NHS has a 42 day medicine supply in normal times. That buffer is gone. Chemists are reporting shortages of insulin and blood pressure pills.
The unions are mobilising. A two day general strike is planned for next month. The TUC is demanding emergency supports: price controls on essential goods, a windfall tax on shipping and energy companies, and a suspension of benefit sanctions. The government is refusing. It says that would be inflationary. The IMF agrees. But the IMF also forecasts that UK living standards will drop by 7 percent this year. That is the biggest fall since records began.
There is no easy way out. The war continues with no ceasefire in sight. The UK economy is not as insulated as it was in the 1970s. We have less manufacturing, fewer power plants, and a population that is older and more indebted. This is not a garden leave recession. It is a crisis that will change the way we think about work, security and the state. For now, the only certainty is that the price of bread will keep rising.
