UK employers warns of slower growth, higher unemployment

LONDON - The Confederation of British Industry cut its forecast for the country's economic growth on Tuesday and predicted unemployment would rise to its highest in more than a decade as the Iran war pushes up energy prices and squeezes living standards.

Consumer price inflation looks set to peak at 3.7% in the first quarter of next year, up from 2.8% in April and similar to the rise predicted by the Bank of England.

"What's happening around the world is compounding the UK's low-growth story. 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," CBI Chief Economist Louise Hellem said.

Following are more points from the forecast:

• UK GDP to grow 1.1% in 2026 and 0.9% in 2027, 0.2 and 0.6 percentage points less than the CBI forecast last December

• Unemployment to peak at 2.0 million or 5.5% of the workforce - its highest since mid 2015 - versus a previous 5% forecast

• BoE to leave rates unchanged at 3.75% through 2026 and 2027

• The CBI's forecasts are similar to ones released in the past month by the OECD and the IMF

• CBI Chief Executive Rain Newton-Smith last week urged Prime Minister Keir Starmer's government not to treat business as "a cash tap" and said businesses' contribution to overall taxation had risen to a record high.

(Reporting by David MillikenEditing by William Schomberg)

Copyright Reuters or USA Today Network via Reuters Connect.

This story was originally published June 8, 2026 at 4:07 PM.