Brits have been warned of a looming 1970s-style period of “stagflation”. Households, businesses and investors should prepare, the CEO financial advice firm deVere Group warned. Nigel Green highlighted that private sector output in the eurozone sank to a 10-month low in March, as the Iran conflict is affecting the global economy. The S&P Global flash euro zone Composite Purchasing Managers’ Index stood at 50.5 in March.

The index for manufacturing prices, meanwhile, jumped to ⁠68.6 from 58.0. The delivery times index plunged to 40.9 from 47.3. Mr Green said: “The figures show the severe impact the Iran war is already having on the euro zone economy. But, like in the 1970s, stagflation could become a widespread global phenomenon characterised by high inflation, low growth, and high unemployment, heavily driven by oil price shocks.

“Back then it hit most developed economies, including the US, Canada, Western Europe, and Japan, largely ending the post-war economic expansion, and it looks like a spectre that may be looming once again.”

The expert added that cost pressures are accelerating at the fastest pace in more than three years, as energy prices surge and supply chains tighten.

Britain experienced an economic boom in the 1970s due to large tax cuts introduced by Anthony Barber in the 1972 budget to boost personal consumption.

The Bank of England then removed quantitative controls on bank lending in late 1971, resulting in an increase in the money supply and credit, fuelling a consumer bubble.

But this was burst by the 1973 OPEC oil embargo, following the Yom Kippur War.

Firms laid off workers and increased prices in an attempt to restore profit margins.

In 1974 and 1975, the expansion of the economy dipped as inflation soared. Later, unemployment returned to an even higher rate than it was prior to the bubble.

This combination of economic stagnation and high inflation came to be known as “stagflation”.

Mr Green said: “Oil and gas prices are feeding directly into production costs, transport, and ultimately consumer prices.

“At the same time, demand is weakening.

“This combination is toxic. Growth is fading just as inflation is being reignited. Central banks have very limited room to respond effectively.”

He added: “Europe and Asia remain particularly exposed due to its reliance on imported energy, leaving businesses vulnerable to sustained price volatility.

“Investors need to recognise that traditional assumptions are breaking down.

“Bonds may not offer the same protection if inflation remains elevated. Equities face margin pressure as input costs rise and consumers pull back.

“Cash loses value in real terms in an inflationary environment. Standing still is not a strategy.”