UK Job Cuts Accelerate in 2026 as Iran Conflict Impacts Economy
Businesses across the United Kingdom are cutting jobs at the fastest pace recorded in 2026, according to new research. Employers have also resisted awarding substantial pay rises throughout March, highlighting the widespread economic impact of the ongoing Iran war.
Sharp Increase in Job Seekers
A study conducted by the Recruitment and Employment Confederation (REC) and KPMG revealed a sharper increase in the number of job seekers over March. Researchers found that the growing availability of candidates was driven by rising redundancies and widespread job scarcity.
This leaves the UK labour market vulnerable to further damage as the consequences of the Iran conflict continue to filter through in the coming weeks. Analysts indicated that high street retailers were among the worst affected sectors, with retail and hospitality struggling amid challenging conditions on labour costs and weakening consumer demand.
Employment Figures Show Contraction
The permanent placements index, which tracks the number of people in full-time positions, showed only a marginal improvement on the previous month. It continued to signal a contraction in employment, as reported by City AM.
Temporary recruitment also declined, albeit at a slower pace than in March. Meanwhile, the number of vacancies fell across both the private and public sectors.
Employment figures for March may leave economists and policymakers in a difficult position, as the data fails to show any significant departure from trends observed over several months.
Mounting Concerns Over Middle Eastern Instability
Concerns are mounting that instability in Middle Eastern trade could unsettle businesses over the coming months. The broader jobs market is already grappling with rising unemployment and a prolonged drop in vacancy numbers.
REC chief executive Neil Carberry suggested that the Labour government's cost of living agenda could be bolstered by addressing the rising cost of doing business.
The Gulf Conflict provided a headwind to hiring in March but this did not stop the trend of stabilisation that has defined 2026 so far, Carberry said.
Business prospects for 2026 remain finely balanced, and confidence will be key. Households and businesses are still sitting on cash that might be put to work in the economy if the climate is right, boosting growth and particularly helping struggling consumer-facing sectors.
Wage Growth Eases
Figures gathered by the two organisations also revealed that starting salaries grew at their slowest pace in five months. This indicates that wage growth is beginning to ease across the UK.
Bank of England rate-setters keep a close eye on pay growth levels amid fears that elevated inflation could push wages higher, triggering a spiralling effect on price increases.
Subdued demand resulting from higher unemployment and the threat of recession could further strengthen the argument for interest rate cuts. Such measures would help to alleviate financial pressures on both households and businesses.
