Starmer’s Hopes to Revive UK Economy Fade as Iran War Drags On

Keir Starmer’s team fear any short-term political gain from his decision not to support US President Donald Trump’s war in Iran may quickly be outweighed by an economic hit that scuppers the UK prime minister’s chances of staying in power.Author of the article:You can save this article by registering for free here. Or sign-in if you have an account.(Bloomberg) — Keir Starmer’s team fear any short-term political gain from his decision not to support US President Donald Trump’s war in Iran may quickly be outweighed by an economic hit that scuppers the UK prime minister’s chances of staying in power.Subscribe now to read the latest news in your city and across Canada.Subscribe now to read the latest news in your city and across Canada.Create an account or sign in to continue with your reading experience.Create an account or sign in to continue with your reading experience.The beleaguered premier found himself unusually aligned with public opinion when he declined to join Trump’s strikes on Iran. U-turns from Conservative leader Kemi Badenoch and Reform’s Nigel Farage, right-wing rivals who initially called for greater British involvement before backing off, handed Starmer a rare win, leaving aides confident voters would view his handling of the crisis favorably.Privately, however, figures across the government despair that the conflict will have severe global consequences lasting until at least year-end, just as the UK economy had looked set to turn a corner. Speaking on condition of anonymity in order to be candid about an ally, those around Starmer who had banked on an economic recovery providing the basis for a political comeback can barely conceal their fury at Trump.Get the latest headlines, breaking news and columns.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try againInterested in more newsletters? Browse here.As one minister put it: leaders from Europe to the Middle East to China are having their domestic plans destroyed by the whims of one man.The White House hit back, saying the UK’s own energy policies are endangering economic security.“President Trump has consistently called for America and our allies to embrace a peace-through-strength doctrine by increasing NATO military spending and shoring up our collective economic security,” White House Spokesman Kush Desai said. “That includes energy security, which the UK has chosen to imperil by blocking oil and gas production in the North Sea to instead embrace unreliable wind energy.” Already weakened by months of speculation about his position amid dismal polls and a series of damaging scandals, Starmer can ill-afford any setback. Labour Party rivals are circling and preparing challenges to his leadership, perhaps in the aftermath of a set of local elections in May, which polling suggests will see large Labour losses.Only two weeks ago the prime minister had hoped to be able to ward off a coup by pointing to signs of green shoots in the economy in the form of two expected interest rate cuts, falling inflation and improving growth. Trump’s war has put paid to that. Those rate cuts will likely be shelved, with traders instead putting the odds of a quarter-point hike by the end of the year at over 80%. Inflation is now expected to rise amid surging oil prices, and growth — already flat-lining according to the latest data on Friday — faces yet another blow. Now, political aides are discussing whether they can blame looming problems on what trade unions are calling “Trumpflation.”An internal UK assessment seen by Bloomberg warned that in a worst-case scenario where the conflict drags on until May, oil prices could soar above $150 a barrel. A mid-range scenario sees the war continuing until mid-April with oil hitting $130. Either would mean a tangible rise in inflation and hit to growth.While officials stress it is too early to know how Chancellor of the Exchequer Rachel Reeves might respond later in the year, some suggested the war had increased the chances of her raising taxes to pay for increased support with domestic and business energy bills and more defense spending. Reeves will deliver her so-called Mais Lecture on the economy on Tuesday and has asked government departments to propose how the UK can align more closely with the European Union’s single market in a renewed push for closer ties. Still, UK economic policy has become less about delivering the boost to growth promised by Labour in the 2024 election, and more about mitigating hits caused largely by Trump, an official said, referring also to his imposition of tariffs last year. Starmer’s supporters stress that he did not just oppose Trump’s war on the grounds of its dubious legality, although he does consider it to be contrary to international law. Just as important in his thinking was the lack of a credible US plan or strategy to avoid extremely damaging military, economic and security consequences, people familiar with the matter said.Western assessments prior to the operation noted likely scenarios in which the Iranian regime remained in place and the Iranian Revolutionary Guard Corps became more assertive against Western and Gulf interests, launching widespread attacks across the Gulf and seeking to wreak havoc on the global economy by closing the Strait of Hormuz and pushing up the price of oil.Outcomes that can now be seen panning out were predicted, a person familiar with the assessments said. Another British official said they were concerned that while Iran had a feasible strategy of causing more economic pain the longer the war continued, the US did not appear to have a comparable plan beyond a bombing campaign.European and Gulf states are unconvinced by US proposals to reopen the Strait of Hormuz, fearing crew will not want to board vessels until Iranian attacks end.There is particular frustration both in Europe and the Middle East that the US did not seem to prepare for Iran closing the Strait of Hormuz, Bloomberg this week.UK officials are also appalled at the double boost Trump has given Russian President Vladimir Putin both with a higher oil price which helps the Kremlin’s revenues for its war in Ukraine, and then by lifting sanctions on Russian oil. Trump’s moves are even more incomprehensible given Russia’s ongoing military and intelligence support for Iran, they said. “All partners should maintain pressure on Russia and its war chest,” Starmer’s spokesman, Tom Wells, told reporters on Friday when asked about the US moves. “The best way to continue to stop Russia supporting hostile actors is to continue our collective pressure.”Officials are also concerned about the war increasing the threat of Iranian-backed and inspired terrorism, as well as another potential migration crisis. It will be Europe and the Middle East that bear the brunt of any such scenario, rather than America, one said.One grim silver lining seen by some Starmer supporters is that the war may make any potential internal rival think twice about going for his job. It has not been lost on the prime minister’s opponents that the conflict could still be ongoing and the economic consequences worsening in May, just when they are expected to move against him, a Labour official said. While any successor might previously have hoped to inherit an improving economy, now they’ll likely inherit a nightmare, they said.Whoever is in charge, their prospects of delivering Labour’s promised growth boost look increasingly bleak.—With assistance from Skylar Woodhouse and Tom Rees.Postmedia is committed to maintaining a lively but civil forum for discussion. Please keep comments relevant and respectful. Comments may take up to an hour to appear on the site. You will receive an email if there is a reply to your comment, an update to a thread you follow or if a user you follow comments. Visit our Community Guidelines for more information.