Labour is facing mounting political pressure over Britain’s labour market outlook after new forecasts warned that more than 400,000 additional people could be out of work by the end of the decade.
The British Chambers of Commerce (BCC) said unemployment could rise to 5.5 per cent by 2028, the highest level since 2014, as firms struggle with rising employment costs, weak growth and structural changes in the economy.
The projections suggest that the total number of unemployed people could approach two million by the end of the decade, marking a significant deterioration in the jobs market during Labour’s first term in office.
The warning is likely to intensify scrutiny of the Government’s economic strategy, particularly its approach to taxation and business costs, which industry groups say are already weighing heavily on hiring decisions. Young workers are expected to be hardest hit. The BCC estimates that nearly 167,000 additional 16 to 24-year-olds could be out of work by 2028, with youth unemployment projected to rise to 17.8 per cent — a level not seen since 2013.
Business leaders pointed to rising labour costs and the rapid adoption of artificial intelligence as key drivers behind the reduction in entry-level roles, alongside what they described as a more challenging tax environment for employers. The Chancellor, Rachel Reeves, has faced repeated criticism from parts of the business community over increases in taxation and employer contributions, which firms argue are limiting their capacity to recruit and expand.
David Bharier, head of research at the BCC, said the UK risked losing momentum in its labour market recovery, warning that firms were “going back on the defensive” despite the absence of a formal recession. He added that rising youth unemployment risked undermining the country’s future skills pipeline.
The broader economic backdrop is also weakening. The BCC downgraded its growth forecast for 2026 to just 1 per cent, citing persistent inflationary pressures and subdued business investment. Separate warnings from economists suggest the labour market could face further strain over the summer if confidence among households and firms continues to deteriorate.
Shadow business secretary Andrew Griffith said the outlook reflected a “damaging combination” of weak growth and rising unemployment, urging ministers to reconsider recent tax decisions. While the Government has argued that its policies are designed to stabilise public finances and support long-term growth, the latest forecasts add to a growing narrative of economic headwinds in its early years in office.
For ministers, the challenge is now twofold: reassuring businesses that investment conditions remain viable while also addressing signs of strain in the labour market that are beginning to appear in forward-looking data. With unemployment projected to rise steadily over the coming years, the political debate over who bears responsibility for the slowdown is only likely to intensify.
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