Around 200,000 more Britons are on track to lose their jobs, pushing unemployment above two million for the first time in years, the Confederation of British Industry has warned – a blow driven by the escalating conflict in the Middle East and surging energy costs.
Latest forecasts from the business group predict the unemployment rate will hit 5.5% this year, up from the 5% – or roughly 1.8 million people – most recently recorded by the Office for National Statistics. The CBI expects joblessness to ease only slightly to 5.3% by 2027.
“CBI warns 200,000 more will lose jobs, pushing unemployment above two million as Middle East conflict slows growth.”
The deteriorating labour market is tied directly to weaker business investment, as firms face higher cost inflation and deepening consumer caution. “What’s happening around the world is compounding the UK’s low-growth story,” said Louise Hellem, the CBI’s chief economist. “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.”
That conflict – described in some reports as the Iran war – has sent global energy prices upward, disrupted supply chains and injected uncertainty into business and consumer decision-making. The CBI has slashed its growth forecasts for the next two years: UK gross domestic product is now expected to slow to 1.1% in 2026 and 0.9% in 2027, a sharp downgrade from earlier projections of 1.3% and 1.5% respectively.
Inflation is also forecast to climb, reaching “towards 4%” by the end of this year as higher energy costs feed through to firms and households. The consumer prices index stood at 2.8% in April but is expected to accelerate in the coming months. Against that backdrop, the CBI expects the Bank of England to keep interest rates at their current 3.75% for the rest of 2026.
Rain Newton-Smith, the CBI’s director general, warned last week that heavy taxation had left businesses at a “tipping point”. She said an extra £345 billion had been added to firms’ tax bills over the past two years, adding: “You cannot fix the cost of living without fixing the cost of doing business. And the cost of doing business …” – her remarks trailing off into a stark warning that “you can’t tax your way to growth”.
The gloomy outlook comes after the government’s national insurance and minimum wage increases since Labour came to power, which the CBI says have compounded the pressure on employers already grappling with rising costs. With a potential four million out of work on the horizon if the slide continues, the question now is whether the Bank of England’s steady hand can prevent the low-growth story from becoming a full-blown crisis.