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Business
Apr 29, 2026
Analyzed by GPT OSS 120B

Lloyds Warns of £151m Iran War Hit as UK Unemployment Set to Rise

AI Summary
Lloyds Banking Group said the fallout from the Iran‑Israel conflict will cost it £151 million and revised its UK growth forecast to 0.5%. It also expects unemployment to climb to 5.6% by mid‑year, signalling a stagflationary environment.

Lloyds Flags £151 million Iran War Loss Amid Stagflation Concerns

Lloyds Banking Group warned that the economic fallout from the Middle‑East conflict could cost the FTSE 100‑listed bank £151 million in the current quarter, while it projects a slowdown in the UK housing market and rising inflation.

Middle‑East Conflict Drives Revised UK Growth and Unemployment Outlook

The group cut its base‑case GDP growth forecast to 0.5% for 2026, down from the 0.8% IMF estimate, and now expects the national unemployment rate to rise to 5.6% by the second half of the year, up from the 4.9% recorded in February.

Financial Numbers: £151 m Impairment, £2 bn Pre‑Tax Profit and Inflation Projections

  • Underlying impairment charge for the quarter: £151 million (total £295 million for the quarter).
  • Pre‑tax profit: £2 billion, a one‑third increase YoY, beating consensus of £1.84 billion.
  • Oil price: > $114 per barrel, pushing headline inflation to an estimated 3.9% by year‑end (current 3.3%).
  • Bank of England base rate: 3.75%, with no further hikes expected this year.

Broader Implications for UK Banking and the Wider Economy

The outlook signals a stagflationary environment—rising prices alongside stagnant growth—pressuring banks’ margins. While US lenders have logged nearly $50 billion in profits from market turbulence, Lloyds expects a more cautious path, citing low‑margin pressures and the need for a gradual de‑escalation of hostilities.

What Lies Ahead: Rate Policy and Economic Recovery Scenarios

Chief Financial Officer William Chalmers reiterated that the Bank of England is unlikely to raise rates further this year and may only consider cuts in the third quarter of 2027. The bank’s assumptions hinge on a “gradual de‑escalation” of the Iran‑Israel conflict, which will shape UK growth, inflation, and employment trends over the next 12‑18 months.