Growth to slow and unemployment to jump to two million, says CBI

Susannah Streeter, chief investment strategist, Wealth Club, said: “Attacks by Iran and Israel may have ceased, but significant progress is still needed in talks to find a longer-term resolution to the Middle East crisis. Brent Crude, the benchmark, has fallen back to trade around $93 a barrel. But even at this level, prices are still around 30% higher than before the conflict broke out, and continue to be a burden for companies and consumers around the world.

“Although the immediate fears of a major supply shock have eased, the conflict has left an energy risk premium firmly embedded in markets. Businesses are once again having to contend with higher fuel, transport and production costs, while households face the prospect of more pressure on already stretched budgets. This risks acting like a brake on economic activity, with consumers becoming more cautious and companies delaying investment plans as uncertainty lingers.

“The knock-on effects are already being felt across the UK economy. Higher energy costs feed through supply chains, and risk pushing up prices for everything from manufacturing and logistics to food production. Firms already grappling with rising wage bills and higher borrowing costs may find margins squeezed even further, leaving them with difficult decisions about hiring and investment.

“This is all being reflected in the Confederation of British Industry’s latest forecasts., The organisation expects the UK unemployment rate to rise from 5% to 5.5%, reflecting the strain on businesses as higher costs weigh on demand. If energy prices remain elevated for an extended period, employers do look set to become increasingly reluctant to recruit, while some firms could be forced to cut jobs in an effort to preserve profitability. It comes at a time when there are fears that AI advances are already swallowing up opportunities, making jobs prospects, for the younger generation in particular, more precarious.”