"UK unemployment is expected to rise to its highest level in five years in 2026 as previously announced tax increases begin to weigh on growth and hiring, according to new forecasts from the EY Item Club. The forecasters warned that joblessness could peak at 5.2 per cent in the first half of this year, up from the current 5.1 per cent and the highest level since January 2021, as modest economic growth is constrained by tighter fiscal policy and global uncertainty."
""Further tax rises may not be expected in 2026, but previously announced measures will begin to raise revenues," he said. "At the same time, the government will need to rein in borrowing and keep public spending broadly flat to meet its fiscal rules. "This tightening of fiscal policy, alongside ongoing global uncertainty, is expected to drag on UK growth over the next year or so.""
Unemployment is projected to rise to about 5.2% in the first half of 2026, up from 5.1%, reaching the highest level since January 2021. Previously announced tax increases, including a further £26 billion in the November Budget and a prior £25 billion national insurance increase, are expected to reduce consumer spending, business investment and hiring. Fiscal tightening and the requirement to rein in borrowing while keeping public spending broadly flat will constrain growth. Ongoing global uncertainty will add additional downside risk. GDP is forecast to grow 0.9% in 2026, then modestly recover to 1.3% in 2027 and 1.4% in 2028.
Read at Business Matters
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