UK jobless rate climbs to 5% as Iran war and Hormuz shock chill hiring

"Figures released by the Office for National Statistics (ONS) on Tuesday showed the jobless rate edging up from 4.9 per cent in the first quarter, confounding City forecasters who had pencilled in no change. The fall in payrolls was sharply worse than the 28,000 decline economists had anticipated, and follows a 28,000 contraction in March, signalling that the cooling that has gripped the British jobs market for the best part of two years is now hardening into something closer to a freeze."

"Job vacancies tumbled to their lowest level in five years, an ominous bellwether for small and medium-sized employers already squeezed by elevated borrowing costs and faltering consumer demand. The Bank of England, which only weeks ago warned that hiring intentions were weakening, now expects the unemployment rate to peak at 5.1 per cent in the second quarter, in line with its April 2026 Monetary Policy Report."

"Behind the figures lies a stark geopolitical backdrop. The United States-Iran war has now entered its eleventh week, with no immediate prospect of a reopening of the Strait of Hormuz, the narrow waterway through which roughly a fifth of the world's oil and gas supply has historically transited. The closure has driven a fresh spike in global energy prices and forced UK businesses, from manufacturers to hospitality operators, to put hiring and capital expenditure on ice."

"For SMEs, the message from the boardroom is plainly defensive. Recruitment freezes, deferred investment and rationed inventory have become the order of the day across sectors most exposed to"

Unemployment increased to 5% and payrolls dropped by 100,000 in April, the steepest monthly decline in years. The jobless rate rose from 4.9% in the first quarter, exceeding City expectations. Payrolls fell more sharply than forecasts, following a 28,000 contraction in March, indicating cooling in the jobs market is intensifying. Job vacancies fell to the lowest level in five years, signaling pressure on small and medium-sized employers facing high borrowing costs and weak consumer demand. The Bank of England expects unemployment to peak at 5.1% in the second quarter. The US-Iran conflict has extended for eleven weeks, with no near reopening of the Strait of Hormuz, raising energy prices and prompting UK businesses to pause hiring and capital spending.

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