The International Monetary Fund (IMF) has cut the UK's economic forecast, projecting growth will slow sharply as a result of the current geopolitical conflict.
Despite Britain being expected to be joint-best performer in the G7 this year, its economic growth was downgraded by a full percentage point to 3.7% for 2022 from 4.7% predicted in January.
But, it's on course to be the worst performer in 2023 when the IMF anticipates an expansion of just 1.2%, compared to previous forecast of 2.3%.
Consumer spending is forecast to be weaker than predicted in the UK as the cost of living crisis bites while tighter financial conditions are expected to cool investment.
"In the United Kingdom, consumption is projected to be weaker than expected as inflation erodes real disposable income, while tighter financial conditions are expected to cool investment," it said.
In its latest World Economic Outlook update, published on Tuesday, the IMF also slashed its global growth estimate from 6.1% in 2021 to 3.6% in 2022 and 2023. In October 2021 it said it expected a 5% rise.
"Global economic prospects have been severely set back, largely because of Russia’s invasion of Ukraine," the IMF said. "This crisis unfolds even as the global economy has not yet fully recovered from the pandemic."
"Even before the war, inflation in many countries had been rising due to supply-demand imbalances and policy support during the pandemic, prompting a tightening of monetary policy."
The Washington-based institution said that the war will "slow economic growth and increase inflation", creating a more challenging environment as economies continue to recover from the pandemic.
The downgrade comes after the UK economy grew 7.4% last year as COVID restrictions unwound.
However, it warned Britain faces the worst inflation shock of all major advanced economies over the next two years. The financial body highlighted that price rises caused by the invasion, including oil, gas, metals, wheat and corn, have resulted in surging food and fuel prices which will especially hit lower-income families the most. It anticipates inflation to "remain elevated for much longer" than previously expected.
"The risk is rising that inflation expectations drift away from central bank inflation targets, prompting a more aggressive tightening response from policymakers," it added.
UK inflation rose to a 30-year high of 7% in March and is expected to reach above 8% this month, significantly higher than the Bank of England’s target rate of 2%.