The shadow of US President Donald Trump threatens to darken the UK's economic future, presenting the new British prime minister with a serious test.
The Bank of England has issued an official warning that the renewed conflict in the Middle East and the collapse of the agreements with Iran risk causing a new surge in inflation and energy prices, reports the authoritative publication Politico in its analysis “US-Iran war looms over Britain's economy“ (politico.eu). This is happening just as the new government in London, headed by Prime Minister Andy Burnham, is taking its first serious steps and promises to control the cost of living of citizens.
Pressure from Washington and an energy shock for the Island
In addition to external inflationary threats, the White House's economic policy is putting direct pressure on Downing Street. Donald Trump has personally raised the issue of the future of drilling in the North Sea, urging the British leadership to increase oil and gas production instead of relying on expensive imports. According to the media in the article “Burnham to Trump: UK 'can't ignore' its oil and gas reserves“ (politico.eu), Trump commented that with proper use of its resources, Britain could be an extremely wealthy country, while at the same time expressing skepticism towards overly liberal economic approaches.
Tariffs as a tool of influence
The situation is also complicated by the constant threat of new trade barriers. The Trump administration has already issued warnings about imposing punitive tariffs against European countries that introduce digital taxes on American technology giants. As the publication notes in “Donald Trump's envoy threatens tariffs if Burnham hits Big Tech with higher taxes“ (politico.eu), US envoy Warren Stevens has openly warned London that economic measures against "Big Tech" could lead to a serious trade response.
Challenges for Burnham's government
The British economy remains squeezed between Prime Minister Burnham's domestic social promises - such as reducing VAT on energy bills - and the global realities dictated by Washington. The Bank of England has already been forced to factor potential energy shocks into its forecasts, with the Monetary Policy Committee remaining divided on whether to raise interest rates in the future to keep inflation under control.