Trump tells UK to ‘drill, baby, drill’ as IMF warns of economic shock

Donald Trump has urged the UK to ‘drill, baby, drill’ after the IMF warned Britain will suffer the biggest economic shock in the G7 from the Iran war.

In a post on social media, the US President branded Labour’s ‘tragic’ refusal to exploit lucrative oil and gas reserves ‘absolutely crazy’ – piling pressure on Energy Secretary Ed Miliband to change course.

The comments came after the International Monetary Fund warned Britain faces the biggest hit from the conflict in the Middle East of any major developed nation as energy prices soar.

In a damning report, the global watchdog said it now expects the UK economy to grow by just 0.8 per cent this year as households and businesses already straining under Labour’s tax hikes face a fresh shock.

The growth forecast is 0.5 percentage points lower than it anticipated in January – marking the sharpest downgrade of any nation in the G7.

In a further humiliation for Rachel Reeves, the IMF warned Britain faces the highest inflation in the G7 and the smallest increase in living standards.

The IMF’s doom-laden World Economic Outlook report added that the conflict in the Middle East risked triggering a global recession.

The projections, published at the IMF’s headquarters in Washington DC, leave Labour’s vow to turn Britain into the fastest growing nation in the G7 in tatters.

The Chancellor, who is in Washington for IMF’s spring meetings, admitted the war ‘will come at a cost to the UK’ and insisted ‘we entered this conflict in a stronger position because of the choices this Government took to build economic stability’.

And she issued the fiercest attack yet from the UK government against Trump’s war in Iran.

‘Obviously no sensible person is a supporter of the Iranian regime, but to start a conflict without being clear what the objectives are and not being clear about how you are going to get out of it, I do think that is a folly,’ she said.

But critics said Labour’s net zero policies and punishing tax hikes on households and businesses have left the UK vulnerable.

One City analyst described the IMF report as ‘a severe reality check’ for Ms Reeves.

Shadow chancellor Sir Mel Stride said: ‘Being handed the biggest downgrade in the G7 is a clear verdict on Rachel Reeves’ choices – and she’s got no one to blame but herself.

‘The Chancellor hiked national insurance in her first Budget, doubling inflation and sending unemployment soaring. She is driving the hospitality industry out of business with business rates increases and planning the first hike in fuel duty in 15 years. Her plan to keep costs down has left us with the highest inflation in the G7, with businesses closing and the cost-of-living skyrocketing.

‘The Conservatives urge international partners to see Rachel Reeves as a cautionary tale of what happens when a politician has no clue what they’re doing and chooses to hammer business relentlessly.’

The IMF report singled out Britain for special mention amid the fallout from the war because of our dependence on foreign energy.

The war will have a ‘large negative effect in some net energy-importing economies such as the United Kingdom’, it said.

The report warned UK inflation will head towards 4 per cent this year while unemployment is set to reach an 11-year high of 5.6 per cent – outstripping the peak seen during the Covid-19 pandemic.

And the IMF said it now expects living standards in the UK to barely grow this year, with output per person set to rise by just 0.3 per cent, the weakest in the G7.

Among all the major economies mentioned in the report, only South Africa is expected to fare worse.

With pressure mounting on Mr Miliband and Prime Minister Sir Keir Starmer to reverse a ban on new drilling in the North Sea, Mr Trump launched a scathing attack on Labour’s policies on his Truth Social platform.

‘Europe is desperate for Energy, and yet the United Kingdom refuses to open North Sea Oil, one of the greatest fields in the World. Tragic!!!’ he wrote.

‘Aberdeen should be booming. Norway sells its North Sea Oil to the U.K. at double the price. They are making a fortune. U.K., which is better situated on the North Sea for purposes of energy than Norway, should, DRILL, BABY, DRILL!!!

‘It is absolutely crazy that they don’t… AND, NO MORE WINDMILLS! President DJT’

Thomas Pugh, chief economist at consulting firm RSM UK, said ‘stagflation’ – a painful combination of rising prices and weak economic growth – now looks like the ‘best-case scenario’ for the UK.

‘But the risks of a recession are clearly rising,’ he added.

It is now feared that the Bank of England will be forced to raise interest rates to control inflation – piling further pressure on households and businesses.

Simon Pittaway, senior economist at the Resolution Foundation, said: ‘British households are more vulnerable than their peers to the economic fallout from war in the Middle East.

‘In the run up to the conflict, the UK already had the highest level of inflation and interest rates in the G7. And while many people are focusing on the UK having the biggest downgrade to growth this year, households will be more worried about experiencing the highest inflation of any G7 economy over the next two years.’

In its latest World Economic Outlook report, the IMF downgraded its forecasts for global growth this year by 0.2 percentage points to 3.1 per cent.

‘Once again, the global economy is threatened with being thrown off course, this time by the outbreak of war in the Middle East,’ it said.

While the downgrade to Britain’s growth forecasts was the biggest of any G7 nation, the UK is expected to outpace Italy and Japan this year with the same rate of expansion as forecast for Germany.

However, the UK will lag behind the US as well as Canada and France.

The IMF said these forecasts are ‘predicated on the assumption that the war will have limited duration, intensity, and scope, such that the disruptions will fade by mid-2026’.

But it warned the outlook would be bleaker in the event of a wider or prolonged conflict.

‘The global economic impact will crucially depend on the conflict’s duration, intensity, and scope, which are inherently unpredictable,’ the IMF said.

‘Geopolitical tensions could worsen even more than they already have – turning the situation into the largest energy crisis in modern times – or domestic political strains could erupt.’

The IMF said a global recession – when output rises by less than 2 per cent – was a ‘close call’ in a more severe scenario that included a fresh surge in the oil price.

Global growth would be reduced by 1.3 percentage points this year to just 1.8 per cent.

‘This would mean a close call for a global recession, which has happened only four times since 1980, with the latest two occasions corresponding to the global financial crisis and the Covid-19 pandemic,’ according to the report.

Ms Reeves said: ‘The war in Iran is not our war, but it will come at a cost to the UK. These are not costs I wanted, but they are costs we will have to respond to. I have vowed that my economic approach to this crisis will be both responsive to a changing world and responsible in the national interest, keeping inflation and interest rates in check to protect households and businesses.

‘We entered this conflict in a stronger position because of the choices this Government took to build economic stability, but there is more to do. That is why we are strengthening Britain’s energy security, backing British industry and protecting households, to build a Britain that is stronger, more resilient, and prepared for the future.’

Susannah Streeter, chief investment strategist at Wealth Club, said: ‘The IMF downgrade is a fresh blow to Rachel Reeves and the Government’s elusive search for growth.

‘The UK is set to be battered by hot oil prices, an energy bill crisis and a tightening of consumer spending.

‘The economy was already flatlining even before war erupted in the Middle East, and now there is little means of resuscitation available given that interest rates look set to ramp up to curb inflation.’

Lindsay James, investment strategist at Quilter, said: ‘The IMF has delivered a severe reality check to Rachel Reeves and the rest of UK Government, with economic growth forecasts slashed heavily. The longer the conflict goes on, the greater potential there is for an economic recession.’