The regions of the UK with the lowest income rates will be hardest hit due to the economic impact of the war in the Middle East, according to a report.
Up to 163,000 jobs are forecast to be lost across the country this year as unemployment declines by 0.4 per cent.
This will be driven by a pull back in consumer spending, the soaring cost of fuel, energy, materials and ingredients, as well as disruption to shipping, the Item Club said.
Meanwhile Heathrow airport reported its passenger numbers fell by 5.3 per cent last month because of the war in the Middle East.
The west London airport said 6.7 million passengers passed through its four terminals in April.
That is compared with 7.1 million during the same month last year.
The reduction reflects “the ongoing impact of the Middle East conflict on some markets and short-term adjustments to travel plans”, the airport said.
The Item Club's latest regional outlook warns that two of the UK’s lowest income regions – South Wales and the Humber – will suffer the most painful jobs market woes in the next year or so because of sharp energy price rises.
They are heavily reliant on manufacturing and construction industries, which Item Club cautions will shed jobs in response to higher costs and supply disruption from the Middle East conflict.
The report is predicting jobs to drop by 5,700 in South Wales and by 2,800 in the Humber over 2026.
Tim Lyne, economic adviser to the Item Club, said: “Some of the lowest income regions will feel the biggest effects of the manufacturing and construction sectors reducing headcount in the face of rising energy prices and supply chain disruption.
“While consumers in these areas typically have less rainy-day savings, which will reduce spending in the retail and hospitality sectors.”
The Bank of England warned late last month the rate of UK unemployment could hit 5.6 per cent this year, up from 5.2 per cent currently, in its more gloomy scenario for the impact of the war.
The Item Club said as households rein in discretionary spending in the face of a surge in the cost of living, the retail and hospitality sector will suffer the biggest slowdown across Britain’s major cities.
The independent forecasting group predicts that employment in London will drop by 25,000 this year as its retail and hospitality sector slows, with a 12,500 reduction in Birmingham, 9,800 drop in Leeds and 6,200 decline in Glasgow.
There may be some bright spots, however, with Cambridge set to see employment growth in 2026, while Belfast and Edinburgh are expected to see relatively limited job losses.
Mr Lyne said: “Across the UK, the jobs market is going to soften, but it’s looking especially fragile in South Wales and the Humber as they’re particularly exposed to manufacturing businesses that are seeing big increases in their costs of materials.
“Resilience will come in places like Cambridge where the tech sector is based.”
The report said that while publicly-funded sectors – such as education, public administration and human health and social work – are expected to hire more jobs over the year, this will not be enough to offset wider losses.
It also warns over a widening gap in living standards across the UK caused by the Iran war.
A Government spokesman said: “Recent figures show that there was an improvement in the labour market at the beginning of the year with unemployment falling below 5 per cent, and 332,000 more people in work than a year ago.
“But we cannot escape the effects of the war in the Middle East which are likely to feed through to prices and employment in the coming months.”
Heathrow chief executive Thomas Woldbye said: “We know passengers want certainty when planning their hard-earned summer holidays, so we are supporting Government and airlines as they work through their plans to get passengers on their journeys.
“While we have seen some short‑term disruption linked to the Middle East conflict, demand for travel remains strong with current fuel supplies stable.
“April was still our busiest month so far this year, underlining the strength of a global hub airport that can adapt quickly in times of uncertainty.”
