UK Job Cuts Accelerate as Iran War Casts Shadow on Outlook

Commuters near the Bank of England in the City of London, UK, on Thursday, April 30, 2026. The Bank of England is likely to keep interest rates on hold on Thursday as policymakers play for time amid the febrile standoff between the US and Iran. Photo by Chris Ratcliffe /Bloomberg

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(Bloomberg) — UK employers slashed jobs by the most since the start of the pandemic in April, suggesting demand for workers is weakening as the Iran war pushes up energy costs and saps business confidence.

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Tax data showed the number of payrolled employees dropped by 100,000 following a 28,000 decline in March, the Office for National Statistics said on Tuesday. It was far worse than the 10,000 fall expected by economists, with retail accounting for much of the decline. 

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However, the ONS said the data is likely to be subject to bigger-than-normal revisions due to it relating to the start of the tax year when some returns from employers may be incomplete.

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Unemployment for the three months through March rose to 5% from 4.9% in the period through February, with the figure for March alone surging to 5.5%. Vacancies were the lowest since 2021.

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The figures pointed to a sharp deterioration in the labor market in recent months as the energy shock caused by the war hits UK businesses.There have been over 140,000 job cuts in the past three months.

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“The latest labour market data suggest the UK jobs market is starting to feel the repercussions of higher energy prices, geopolitical uncertainty and weaker business confidence,” said Martin Beck, chief economist at WPI Strategy.

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Economists are cutting their 2026 growth projections on the back of another energy shock caused by the conflict in the Middle East. While the economy expanded by a healthy 0.6% in the first quarter, forecasters expect growth to return to more pedestrian levels for the rest of the year.

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Wage pressures also continued to ease with regular pay growth cooling to 3.4% in the three months through March, the lowest since 2020. Private sector pay rose 3%, down from a 3.2% increase previously.

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With inflation being kept elevated by the jump in energy costs, easing pay growth means households could feel the squeeze more in the coming months. Figures on Wednesday are expected to show inflation dropping to 3%, though experts expect it to pick up again later in the year when household gas and electricity bills are predicted to rise.

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In real terms, wages grew just 0.3% on an annual basis in January to March 2026, rising at the slowest pace since 2023.

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