Birmingham is expected to lose 12,500 jobs this year because of economic problems caused by the Iran War, according to a report. Nationally, as many as 163,000 roles could be lost, with lower-income regions set to be hit hardest.
Regional Impact
The Item Club's latest regional outlook warned that two of the UK's lowest income regions – South Wales and the Humber – would suffer the most painful jobs market woes in the next year or so because of sharp energy price rises. They are heavily reliant on manufacturing and construction industries, which the Item Club cautioned would shed jobs in response to higher costs and supply disruption from the Middle East conflict.
The report predicted jobs would drop by 5,700 in South Wales and by 2,800 in the Humber over 2026.
Tim Lyne, economic adviser to the Item Club, said: “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. While consumers in these areas typically have less rainy-day savings, which will reduce spending in the retail and hospitality sectors.”
National Outlook
Overall, it forecasted UK employment would decline by 0.4 per cent this year, equivalent to 163,000 job losses on a net basis. That was predicted to be driven by a pullback in consumer spending, the soaring cost of fuel, energy, materials and ingredients, as well as disruption to shipping.
The Bank of England warned late last month the rate of UK unemployment could hit 5.6 per cent this year, up from 5.2 per cent currently, in its more gloomy scenario for the impact of the war.
The Item Club said as households reined in discretionary spending in the face of a surge in the cost of living, the retail and hospitality sector would suffer the biggest slowdown across Britain's major cities.
The independent forecasting group predicted employment in London would drop by 25,000 this year as its retail and hospitality sector slowed, with a 12,500 reduction in Birmingham, 9,800 drop in Leeds and 6,200 decline in Glasgow.
Bright Spots
There may be some bright spots, however, with Cambridge set to see employment growth in 2026, while Belfast and Edinburgh are expected to see relatively limited job losses.
Mr Lyne said: “Across the UK, the jobs market is going to soften, but it's looking especially fragile in South Wales and the Humber as they're particularly exposed to manufacturing businesses that are seeing big increases in their costs of materials. Resilience will come in places like Cambridge where the tech sector is based.”
The report said that while publicly-funded sectors – such as education, public administration and human health and social work – were expected to hire more jobs over the year, it would not be enough to offset wider losses.
Living Standards Gap
It also warned of a widening gap in living standards across the UK caused by the Iran war. Low-income areas will see households suffer the steepest hikes in the cost of living, as more of their spending goes on essentials, such as food, fuel and energy bills, which are set to see big price rises.
Households in cities such as Newcastle, Belfast and Birmingham spend as much as 13 per cent of their disposable income on energy and food, compared to less than nine per cent for an average household in London, according to the report. This could see those cities left particularly exposed if the Iran war is not resolved soon, the Item Club said.
