Almost 250,000 people could lose their jobs by the middle of 2027 as the UK 'flirts with recession', according to analysis from the EY Item Club. The warning comes after business confidence was shattered by the US-Israel war on Iran, leading to the closure of the Strait of Hormuz and soaring energy costs.
Chancellor Rachel Reeves has summoned bank chiefs for talks aimed at containing the economic fallout. Twin reports from top accounting firms EY and Deloitte underline the scale of the threat, with the EY Item Club forecasting that the UK economy will flatline in the second and third quarters of this year, leaving it at risk of a technical recession.
The EY Item Club expects growth to halve from 1.4% in 2025 to 0.7% this year, while unemployment is projected to rise to 5.8% by mid-2027, up from the current 5.2%. This would increase the number of jobseekers from 1.87 million to more than 2.1 million. Inflation is also forecast to climb to nearly 4% in the second half of 2026, almost double the Bank of England's 2% target.
A separate Deloitte survey of chief financial officers found confidence slumped to a net -57% in March, the lowest since the start of the Covid-19 pandemic. CFOs cited geopolitical developments, energy costs, and inflation as their top concerns, and are shifting to defensive strategies focused on cost control and cash conservation. Ian Stewart, chief economist at Deloitte UK, said: 'Rarely in the last 16 years have UK CFOs been more focused on cost control than today.'
The economic shock is expected to be the biggest since the pandemic, driven by the Iran crisis and its impact on energy prices and supply chains. Matt Swannell, chief economic adviser at the EY Item Club, warned that 'spiralling energy costs and disruption to supply chains will push the UK to the brink of a technical recession' in the middle of this year.
