UK unemployment to hit 5.5% in 2026 as growth slows, CBI warns

Key Points

In its June 2026 economic forecast, the Confederation of British Industry (CBI) warned that UK unemployment will rise to 5.5% in 2026.
This is around 2 million people and roughly 200,000 more than the current 5% (1.8 million) reported by the ONS.
The CBI cut its UK GDP growth forecast to 1.1% for 2026 and 0.9% for 2027, blaming the conflict in the Middle East, higher energy prices, and weaker business investment.
It expects inflation to climb towards 4% by the end of 2026, double the Bank of England's 2% target, while the Bank holds interest rates at 3.75%.

Hundreds of thousands more Brits could be pushed out of work over the next year, with one of the country’s most influential business groups warning that a slowing economy and the fallout from conflict in the Middle East are set to take a heavy toll on households and employers alike.

In its latest economic forecast, the Confederation of British Industry (CBI) said it expects the UK unemployment rate to climb to 5.5% in 2026. That would equate to roughly two million people out of work, around 200,000 more than are currently unemployed.

The figure marks a notable deterioration from the most recent reading. The Office for National Statistics last put the unemployment rate at 5%, or about 1.8 million people.

The CBI attributed the softening jobs market to firms pulling back on investment as they contend with rising costs and growing doubts about how much households will be willing to spend. The group expects the rate to ease only slightly in the following year, to around 5.3% in 2027.

The bleaker employment outlook came alongside a downgrade to the CBI’s growth expectations. The group now forecasts that UK gross domestic product (GDP), the broadest measure of economic output, will expand by just 1.1% in 2026 and 0.9% in 2027, down from growth of 1.4% recorded in 2025.

Those projections represent a sharp markdown from the CBI’s previous estimates, which had pencilled in growth of 1.3% in 2026 and 1.5% in 2027.

The CBI said the principal driver behind the gloomier picture is the conflict in the Middle East, which it said has driven inflation higher than previously expected and weighed on confidence among businesses and consumers.

It pointed to a combination of higher global energy prices, disrupted supply chains, and heightened uncertainty as factors set to drag on the economy.

Louise Hellem, Chief Economist at the CBI, said global events were worsening an already fragile domestic outlook.

“We saw weak momentum throughout 2025, but if it weren’t for the latest global shocks, we could be having a much more positive conversation about the economy today,” she said. “Last year it was tariffs and this year it’s the conflict in the Middle East.”

For households, the most immediate consequence is likely to be felt through prices. The CBI expects inflation to push “towards 4%” by the end of this year as steeper energy costs work their way through to firms and consumers. That would be roughly double the Bank of England’s 2% target.

UK consumer prices index inflation stood at 2.8% in April, the most recent reading, though the CBI expects it to pick up pace over the coming months.

Despite the anticipated rise in inflation, the CBI said it expects the Bank of England to leave its base interest rate unchanged at 3.75% for the remainder of the year. The base rate influences the cost of borrowing across the economy, including on mortgages and loans, as well as the returns savers earn on their deposits.