Worst job losses to hit 2 UK regions due to Trump war with Iran | Personal Finance | Finance

Two of Britain’s poorest regions would suffer the most job losses amid the economic fallout from the US-Iran war, forecasters say. South Wales and the Humber are set to suffer the most painful job market troubles in the next year or so due to soaring energy price rises, according to analysis from the Item Club.

Both areas rely heavily on manufacturing and construction industries, which Item Club cautions will shed jobs in response to higher costs and supply disruption from the Middle East conflict. The report is predicting jobs to 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.”

Overall it forecasts UK employment will decline by 0.4% this year, equivalent to 163,000 job losses on a net basis.

This will be driven by consumers pulling back on 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% this year, up from 5.2% currently, in its more gloomy scenario for the impact of the war.

Item Club said as households rein in discretionary spending in the face of a surge in the cost of living, the retail and hospitality sector will suffer the biggest slowdown across Britain’s major cities.

The independent forecasting group predicts employment in London will drop by 25,000 this year as its retail and hospitality sector slows, with a 12,500 reduction in Birmingham, 9,800 drop in Leeds and 6,200 decline in Glasgow.

There may be some bright spots, however, with Cambridge set to see employment growth this year, while Belfast and Edinburgh are expected to see relatively limited job losses.

The report said while publicly-funded sectors – such as education, public administration and human health and social work – are expected to hire more jobs over the year, this will not be enough to offset wider losses.

It also warns over 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.

A Government spokesman said recent figures show there was an improvement in the labour market at the beginning of the year with unemployment falling below 5%, and 332,000 more people in work than a year ago.

They added: “But 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.

“We will do everything we can to support the country through this period, including by slashing energy bills by up to 25% for 10,000 manufacturers.

“Our mission for clean power by 2030 will get us off the rollercoaster of fossil fuel prices, to cut bills for businesses and households for good.”

Susannah Streeter, Chief Investment Strategist at Wealth Club, said it is going to be hard for the Government to deliver policies which will make an immediate difference to households.

She said: “With the political dust settling on another weekend of upheaval for British politics, the Prime Minister, Keir Starmer, is attempting to draw a shaky line under his party’s losses.

“He’s aiming for a reset in a speech which is expected to focus on his efforts to tackle Britain’s big challenges. The problem is, the war in the Middle East has made this even harder, given the fresh inflationary challenges it has thrown up, which are constraining the Government’s spending power.”