The UK economy has officially contracted for the first time since the pandemic, driven by the fallout from the Iran conflict. GDP figures published this morning show a 0.3% drop for the first quarter.
The Treasury is now demanding urgent emergency talks with the Bank of England. This is a blow for the Chancellor, who had pinned hopes on a post-Brexit bounce. The PM's handling of the crisis is now under serious scrutiny from backbenchers.
No.10 is rattled. Sources say the Chancellor called the Governor directly after the data drop.
The meeting is set for tomorrow. Expect fireworks. The Bank will be under pressure to cut rates, but inflation is still sticky.
This is a nightmare scenario for the Treasury. The oil price spike from the Gulf disruption has hammered business confidence. The service sector is already showing signs of a sharp slowdown.
Manufacturing orders have fallen off a cliff. The PM is holed up in the Cabinet Room. Chief Whip is pinging phones.
A backbench rebellion is brewing over the costs of extended military deployments. The Defence Secretary is under fire for escalating rhetoric. The mood at Westminster is febrile.
One senior Tory described it as 'the worst week since Black Wednesday'. The Opposition is scenting blood. They are calling for a recall of Parliament.
No.10 is refusing. This will not last.
The numbers are too grim. The Treasury's call for talks is an admission that the economic situation is slipping out of control. The Governor will want to see more than a political fix.
He will demand action on the conflict itself. That is not something the PM can deliver quickly. Expect the news cycle to be dominated by this tonight.
The Chancellor will go on the media round tomorrow with a message of reassurance. It will not work. The damage is deeper than that.
