Up to 250,000 people could lose their jobs by mid-2027 as the UK economy teeters on the brink of recession, according to analysis from the EY Item Club. The warning comes as business confidence collapses in the wake of the US-Israel conflict with Iran, which has disrupted global trade and sent energy prices soaring.
The EY Item Club expects the UK economy to flatline in the second and third quarters of this year, meeting the technical definition of a recession. Growth is forecast to halve from 1.4% in 2025 to 0.7% in 2026, while unemployment is projected to rise from 5.2% to 5.8%, adding nearly 250,000 to the jobless total.
Chancellor Rachel Reeves has summoned bank chiefs for talks to contain the economic fallout. A separate report from Deloitte found that chief financial officers (CFOs) at major UK firms are more pessimistic than at any time since the start of the Covid-19 pandemic, with confidence slumping to -57% from -13% in the previous quarter.
CFOs are prioritising cost control and cash conservation, scaling back capital spending and hiring plans. Geopolitical risks, particularly energy costs and inflation, are cited as top concerns. The EY Item Club warns that spiralling energy costs and supply chain disruptions will squeeze consumer spending and deter investment.
The International Monetary Fund has already downgraded UK growth forecasts for 2026 to 0.8%, the sharpest cut among G7 nations. Inflation is expected to approach 4% in the second half of 2026, nearly double the Bank of England's target, though policymakers are predicted to avoid knee-jerk interest rate rises.
