The UK is expected to lose around 163,000 jobs this year as the economic fallout from the war involving Iran drives up energy costs, disrupts supply chains, and squeezes household spending, according to a stark new report.
The latest regional outlook from the Item Club warns that some of the UK’s poorest areas — particularly South Wales and the Humber — are likely to suffer disproportionately as manufacturing and construction firms respond to soaring operating costs by cutting jobs.
The forecasting group predicts employment in South Wales will fall by 5,700 positions over 2026, while the Humber is expected to lose around 2,800 jobs.
Analysts said the two regions are especially vulnerable because of their heavy reliance on energy-intensive industries already under pressure from rising fuel, materials and transportation costs linked to instability in the Middle East.
Tim Lyne, economic adviser to the Item Club, warned that lower-income communities would face a double blow from weakening labour markets and rising living costs.
“Some of the lowest-income regions will feel the biggest effects of the manufacturing and construction sectors reducing headcount in the face of rising energy prices and supply chain disruption,” he said.
“While consumers in these areas typically have less rainy-day savings, this will reduce spending in the retail and hospitality sectors.”
Overall, the report forecasts UK employment will decline by 0.4 per cent this year, equivalent to a net loss of 163,000 jobs nationwide.
London is expected to lose around 25,000 jobs, largely driven by weakness in retail and hospitality, while Birmingham could see 12,500 positions disappear. Leeds is forecast to lose 9,800 jobs and Glasgow around 6,200.
The report attributes the slowdown to a combination of reduced consumer spending, higher energy prices, rising input costs and disruption to global shipping routes.
The warning comes after the Bank of England suggested unemployment could rise to 5.6 per cent this year under its more pessimistic economic scenarios linked to the conflict in the Middle East.
The Item Club also warned that the crisis risks widening regional inequalities across Britain, with poorer households likely to be hardest hit by increases in food, fuel and energy bills.
According to the report, households in cities including Newcastle, Belfast and Birmingham spend up to 13 per cent of disposable income on essentials such as food and energy, compared with less than 9 per cent for the average London household.
Analysts said this leaves lower-income regions particularly exposed if instability in the Middle East continues and energy prices remain elevated.
Some areas are expected to prove more resilient. Cambridge is forecast to continue adding jobs due to the strength of its technology sector, while Belfast and Edinburgh are predicted to experience comparatively limited declines in employment.
The report added that growth in publicly funded sectors such as healthcare, education and public administration would help soften the impact, though not enough to offset wider losses across the private sector.
A Government spokesman acknowledged the growing economic risks linked to the conflict, while insisting ministers were taking action to support businesses and households.
“We cannot escape the effects of the war in the Middle East, which are likely to feed through to prices and employment in the coming months,” the spokesman said.
The Government said measures, including plans to reduce energy bills for manufacturers and accelerate investment in domestic clean power generation, were intended to reduce Britain’s vulnerability to future global energy shocks.
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