The outlook for Britain's economy has darkened sharply, with employers warning that job losses are set to rise in the months ahead.
Businesses say a combination of global instability and higher domestic costs is putting increasing pressure on hiring.
Britain faces a worsening jobs crisis, with around 200,000 more workers expected to lose their jobs before the end of the year, according to a warning from the Confederation of British Industry (CBI).
The business group has cut its forecasts for UK economic growth, blaming the conflict in Iran, rising global energy prices and Government tax increases on employers.
The CBI said households and businesses are already feeling the impact, with tensions in the Middle East disrupting supply chains and driving up costs.
The downgrade is a setback for Chancellor Rachel Reeves, with the CBI arguing that higher National Insurance contributions and increases to the minimum wage have added to the pressures facing businesses.
The CBI now expects GDP to expand by just 1.1 per cent this year, a notable reduction from its earlier forecast of 1.3 per cent.
Next year looks even bleaker, with the business group projecting growth of merely 0.9 per cent in 2027, well below the 1.5 per cent it had previously anticipated.
This marks a sharp deterioration from the 1.4 per cent expansion recorded in 2025, when the economy was already showing signs of weakness.
The organisation pointed to elevated energy prices, fractured supply chains and widespread uncertainty as key factors dragging on economic performance.
CBI cuts growth forecast
|CBI/GBNEWS
Government spending and investment remain the primary drivers keeping growth afloat, according to the CBI's assessment.
Unemployment is forecast to climb to 5.5 per cent, representing roughly two million people out of work, up from the current rate of 5 per cent reported by the Office for National Statistics.
The CBI attributed the deteriorating jobs market to falling business investment, persistent cost pressures and mounting worries about household spending power.
Some relief is expected in 2027, with joblessness predicted to ease slightly to around 5.3 per cent.
Unemployment is forecast to climb to 5.5 per cent, representing roughly two million people out of work
| GETTYInflation is anticipated to accelerate towards four per cent as higher energy costs filter through to consumers and businesses alike, up from the 2.8 per cent recorded in April.
Despite these pressures, the CBI expects the Bank of England to maintain interest rates at their current level of 3.75 per cent throughout the remainder of 2026.
Louise Hellem, the CBI's chief economist, said: "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. Last year it was tariffs and this year it's the conflict in the Middle East."
The warning follows a speech last week by CBI chief executive Rain Newton-Smith, who declared that British businesses have reached a "tipping point" under the weight of taxation.
Critics have criticised the Government for adding an estimated £345billion to corporate tax bills over the past two Budgets
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She criticised the government for adding an estimated £345 billion to corporate tax bills over the past two Budgets through employer national insurance rises and minimum wage increases.
Ms Newton-Smith said: "You cannot fix the cost of living without fixing the cost of doing business."
She added that companies are not a "cash tap" and warned that "you cannot tax your way to growth."