Brits have been put on high alert for a jobs cull today as a Cabinet minister warned that the Middle East chaos will batter the economy. Work and Pensions Secretary Pat McFadden stated that the ongoing closure of the Strait of Hormuz—through which a fifth of the world's oil typically passes—would have 'implications' for the labour market.
The bleak comments came with no end in sight to the standoff between the US and Iran, after Donald Trump launched the war at the end of February. Mr Trump effectively shelved efforts to escort stranded tankers out of the Strait last night, despite previously branding the action 'Project Freedom'. The President said he was pausing the plan to try and finalise a peace deal, although there is little evidence progress has been made towards one.
Touring broadcast studios for the Government this morning, Mr McFadden said the economy had been 'going in the right direction' before the US-Israeli war began. He said: 'The latest unemployment figures for February showed a fall, interest rates were expected to come down, the markets were pricing in a couple of cuts during the course of the year. The truth is, with the effect of the Iran war, we can't count on any of that at the moment. There is likely to be an effect on prices, which feeds through from energy costs, and there may well be labour market implications.' Asked if this meant job losses, Mr McFadden replied: 'Yes. It could happen.'
The UK jobless rate dipped to 4.9 per cent in the three months to February, its lowest level since last summer. However, UK borrowing costs have been surging and there are already signs the turmoil is feeding through into higher inflation. A closely watched survey suggested today that growth in the UK's services sector rebounded somewhat last month. However, experts warned that firms face a 'short-lived' recovery amid surging costs and lower demand.
The S&P Global UK services PMI survey showed a reading of 52.7 in April, up from 50.5 the previous month. Any reading above 50 means the sector is growing while any reading below signals it is contracting. Activity across the industry, which spans businesses from hospitality and leisure to healthcare and transport, has been increasing for almost a year. But while the latest reading marked an improvement from March—when the US-Israel's conflict with Iran escalated—it signals a slower rate of growth than at the start of the year. Businesses taking part in the survey, which is watched closely by economists, cited worries about intensifying pressures on inflation, global supply shortages and elevated borrowing costs as factors holding back business and consumer demand in April.
Mr Trump's announcement last night followed US secretary of state Marco Rubio's insistence that a ceasefire in the region was holding after the initial military operation against Iran had concluded. Mr Rubio told a White House press briefing on Tuesday that for peace to be achieved, Iran must agree to the president's demands on its nuclear programme and to reopen the strait. US defence secretary Pete Hegseth also repeated he expected the rest of the world 'to step up', and said Washington would hand over responsibility 'at the appropriate time and soon'. A US blockade of Iranian ports is due to remain in place while talks are held to end the war. The White House has been deeply critical of the response by the UK and other allies to the Gulf crisis, insisting other nations needed the strait more than the US.
