UK Economy Warning: 200,000 Job Losses Forecast as Energy Costs and Global Conflict Weigh on Growth
The Confederation of British Industry warns that around 200,000 UK jobs could be lost this year as rising energy costs and Middle East tensions slow economic growth. Unemployment is forecast to reach 5.5% in 2026, while GDP growth and inflation outlooks are downgraded amid global uncertainty.
The UK economy is facing a significant slowdown, with new forecasts suggesting that around 200,000 additional people could lose their jobs this year. The warning comes from the Confederation of British Industry (CBI), which cites rising energy costs and ongoing geopolitical tensions in the Middle East as key factors weighing on growth.
According to the CBI, the UK unemployment rate is expected to rise to 5.5% in 2026, equivalent to roughly two million people out of work. This compares with the current rate of 5%, or around 1.8 million unemployed, based on Office for National Statistics data. A slight improvement is then expected in 2027, when unemployment is forecast to ease to 5.3%.
The organisation attributes the weakening labour market to reduced business investment, as companies face higher operating costs and growing uncertainty over consumer demand. These pressures are expected to continue affecting hiring decisions across multiple sectors.
The broader economic outlook has also deteriorated. The CBI has downgraded its UK growth forecasts, now predicting gross domestic product (GDP) growth of just 1.1% in 2025, falling further to 0.9% in 2027. This marks a downward revision from earlier estimates of stronger expansion in the coming years.
Louise Hellem, chief economist at the CBI, said global instability is deepening the UK’s already weak growth environment. She noted that while the economy showed weak momentum through 2025, conditions could have been more positive without recent international shocks.
The report highlights last year’s tariff disputes and this year’s Middle East conflict as major contributors to the downturn. Rising global energy prices, disrupted supply chains, and increased uncertainty for businesses and consumers are all expected to suppress economic activity.
Inflation is also forecast to rise, with the CBI predicting it could approach 4% by the end of the year as higher energy costs filter through to households and businesses. The most recent UK Consumer Prices Index (CPI) inflation rate stood at 2.8% in April.
Despite these pressures, the CBI expects the Bank of England to maintain interest rates at 3.75% throughout 2026, as policymakers continue balancing inflation risks against slowing growth.
