The UK economy is heading for a significant downturn, with unemployment projected to hit two million and growth expected to slow sharply, according to new forecasts from the Confederation of British Industry (CBI). The influential business group warns that the ongoing conflict in the Middle East and escalating energy costs are weighing heavily on consumers and businesses.
The CBI’s latest economic outlook predicts an additional 200,000 Britons will become unemployed, pushing the jobless rate to 5.5 per cent this year — equivalent to approximately two million people. The Office for National Statistics most recently reported unemployment at 5 per cent, or around 1.8 million individuals. The CBI attributes the weakening labour market to reduced business investment, driven by higher cost inflation and concerns over consumer spending. The forecast suggests a slight improvement to 5.3 per cent by 2027.
“CBI warns additional 200,000 Britons will become unemployed, pushing jobless rate to 5.5% this year.”
The organisation has also downgraded its growth projections. UK GDP is expected to slow from 1.4 per cent last year to 1.1 per cent in 2026, then further to 0.9 per cent in 2027. This marks a notable reduction from previous forecasts, which had anticipated growth of 1.3 per cent this year and 1.5 per cent in 2027.
Louise Hellem, chief economist at the CBI, said: “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 indicate inflation is likely to climb “towards 4 per cent” by the end of this year, as higher energy costs filter through. The UK consumer prices index was recorded at 2.8 per cent in April but is anticipated to accelerate. The CBI also expects the Bank of England to maintain interest rates at their current level of 3.75 per cent for the remainder of the year.