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Economy
May 11, 2026
Analyzed by GPT OSS 120B

UK Faces 163,000 Job Losses in 2026 as Iran Conflict Fuels Oil Surge

AI Summary
The Item Club forecasts that the UK will lose 163,000 jobs in 2026 as the Iran war drives oil prices higher and squeezes energy‑intensive sectors. The hit will be most severe in low‑income regions and could deepen political pressures on the Labour government.

UK economy is projected to shed 163,000 jobs in 2026, according to forecasting group Item Club, as the ongoing Iran war pushes oil prices up and drags manufacturing, construction, retail and hospitality sectors.

Projected Job Losses Amid Iran Conflict

The latest regional outlook from the Item Club warns that the war‑induced energy shock will ripple through the British labour market. With no sign of a cease‑fire, higher energy costs and supply chain disruptions are expected to force firms to cut headcount, especially in regions that rely heavily on manufacturing and construction.

Numbers Behind the Forecast

  • National total: 163,000 jobs lost in 2026
  • South Wales: 5,700 jobs
  • The Humber: 2,800 jobs
  • London (retail & hospitality): 25,000 jobs
  • Birmingham: 12,500 jobs
  • Leeds: 9,800 jobs
  • Glasgow: 6,200 jobs

Regional Pain Points and Sectoral Spillovers

Lower‑income areas such as South Wales and the Humber are hit hardest because they depend on energy‑intensive industries. As households in these regions face tighter budgets, discretionary spending falls, amplifying the slowdown in retail and hospitality nationwide. The forecast also underscores a broader macro‑economic drag: higher oil prices raise production costs, erode profit margins, and dampen investment confidence.

What the Outlook Means for Policy and Markets

Labour leader Keir Starmer faces a political test, with rising unemployment likely to fuel criticism ahead of upcoming elections. Policymakers may need to consider targeted fiscal support for the most affected regions, alongside measures to stabilise energy prices. Financial markets are already reacting to the oil rally—Brent futures rose over 4% to around $105 per barrel—which could translate into higher inflation pressures and influence Bank of England rate decisions.