The number of people out of work in the UK is forecast to surge by 200,000 this year, driven by the economic shockwaves from the conflict in Iran, according to a stark warning from business lobby group the Confederation of British Industry (CBI).
CBI Forecasts Sharp Rise in Unemployment
The CBI has cautioned that the UK's unemployment rate could peak at an 11-year high of 5.5%, a significant increase from the 5% it predicted in December. This would leave approximately two million people seeking employment. The weakening labour market is attributed to reduced business investment amid higher cost inflation and concerns over consumer spending, the CBI's economists stated. They predict that unemployment will then ease to around 5.3% for 2027.
Growth Forecasts Downgraded
The organisation has also downgraded its growth forecasts for the UK economy over the next two years. The CBI now estimates that gross domestic product (GDP) will slow from 1.4% growth last year to 1.1% in 2026 and then 0.9% in 2027. Previously, it had pointed towards growth of 1.3% this year and 1.5% in 2027. The revision is largely due to the impact of the Middle East conflict, which has driven up inflation, raised global energy prices, disrupted supply chains, and increased uncertainty for businesses and consumers.
Impact of Global Shocks
Louise Hellem, chief economist at the CBI, commented: “What’s happening around the world is compounding the UK’s low-growth story. We saw weak momentum throughout 2025, but if it weren’t for the latest global shocks, we could be having a much more positive conversation about the economy today. Last year it was tariffs and this year it’s the conflict in the Middle East.” The projections also indicate that inflation is likely to rise “towards 4%” by the end of this year, as higher energy costs feed through to firms and households. UK consumer prices index (CPI) inflation was most recently recorded at 2.8% in April but is expected to accelerate. The CBI expects the Bank of England to maintain interest rates at their current level of 3.75% for the rest of this year.
Contrasting Hiring Intentions
The gloomy forecasts on the jobs market contrast with separate data suggesting a surge in hirings later this year. A survey by recruitment giant ManpowerGroup found that 37% of businesses were planning to recruit, up 10 percentage points quarter-on-quarter and 18 percentage points year-on-year. Michael Stull, UK managing director at ManpowerGroup UK, said: “UK businesses are realising the need for people. Uncertainty has dominated the UK economy and job market for months, but that is not sustainable for businesses, employees or the consumer. That’s why we are seeing the needle shifting in terms of a willingness to hire.” The increase in hiring intentions is being seen across all industries, Manpower added. The North West recorded the strongest outlook at 48% – the highest in the country – followed by the North East at 46%.
