UK Hit by Layoff Surge Amid US-Iran Conflict

UK unemployment has surged as a result of escalating US-Iran tensions, with job vacancies hitting a five-year low. According to the UK’s Office for National Statistics (ONS), the unemployment rate rose to 5% in the first quarter of 2026, while vacancies fell by 28,000 (3.9%) to 705,000 between February and April 2026—the lowest level since April 2021.

Liz McKeow, ONS Director of Economic Statistics, said low-wage sectors such as hospitality and retail have seen the sharpest declines in both vacancies and staff numbers over recent months and the past year.

Businesses have delayed hiring, contributing to the drop in vacancies, while higher labour costs, including changes to employment taxes, have exacerbated unemployment.

Analysts caution that labour demand may continue to weaken if the conflict persists. Combined with slowing income growth, this could lead the Bank of England (BoE) to raise interest rates to control inflation.

UK income growth averaged 3.4% in Q1 2026, but only 0.3% after inflation. Typically, slower wage growth would prompt expectations of rate cuts, but current conditions differ.

Susannah Streeter, Chief Strategist at Wealth Club, said: ‘Given inflation concerns, interest rates are likely to remain higher for longer.’