Quarter of a million people could lose job by middle of 2027 as UK ‘flirts with recession’, analysis says

The UK faces the prospect of a quarter of a million job losses by mid-2027 as the economy flirts with recession, according to recent analyses from leading accounting firms. The economic outlook has been severely impacted by the ongoing conflict involving Iran, which has disrupted global energy supplies and sent oil and gas prices soaring. Chancellor Rachel Reeves has convened talks with banking leaders to address the fallout, as forecasts warn of stagnant growth and rising unemployment in the coming years. The EY Item Club projects the UK economy to flatline during the second and third quarters of this year, raising the risk of a technical recession defined by two consecutive quarters of contraction. Growth is expected to slow sharply from 1.4% in 2025 to just 0.7% this year, undermining the momentum seen earlier in 2024. Unemployment is forecast to rise to 5.8% by 2027, up from the current five-year high of 5.2%, with nearly 250,000 additional job losses attributed to the economic shock from the Middle East crisis. Spiraling energy costs and supply chain disruptions are cited as key factors squeezing consumer spending and dampening corporate investment. This bleak outlook follows an International Monetary Fund report that downgraded the UK’s growth forecast for 2026 to 0.8%, the largest reduction among G7 nations. Inflation is expected to climb to nearly 4% in the latter half of 2026, almost double the Bank of England’s target, though policymakers are anticipated to avoid aggressive interest rate hikes in response. Meanwhile, business confidence has plummeted, with Deloitte reporting a sharp decline in optimism among chief financial officers, reaching its lowest point since the onset of the Covid-19 pandemic. The combined impact of geopolitical tensions, rising energy prices, and weakened business sentiment poses significant challenges for the UK economy. Policymakers and industry leaders face mounting pressure to navigate these headwinds to prevent a deeper economic downturn and mitigate the potential social consequences of widespread job losses.