Unemployment will rise by around 400,000 by the end of 2028, taking the total to two million, according to a new forecast from the British Chambers of Commerce (BCC).
The business group expects the jobless rate to peak at 5.5%, the highest level since 2014. The rate already stands at 5.0%, with 1.81 million people out of work in the three months to March, according to the Office for National Statistics. That is 192,000 more than a year earlier.
Young people hit hardest
The BCC says young people will be hit hardest. Youth unemployment for 16 to 24-year-olds is already at an 11-year high of 16.2%, with 729,000 out of work. The group expects that rate to climb towards 17.8% by mid-2027.
David Bharier of the BCC said the UK was ’not in recession but the economy remains trapped in a cycle where each recovery is interrupted before gaining traction’. He warned that approaching 18% youth unemployment risked weakening ’the skills pipeline it needs for the next economy'.
Why the jobs are going
The BCC names two main causes: the rise in employer National Insurance announced by Chancellor Rachel Reeves, and the spread of AI through entry-level office and admin work. Labour costs were the top pressure cited by businesses in its latest survey. Employer National Insurance is a tax on hiring. When it goes up, the cost of taking on a worker goes up, and the first jobs to disappear are the ones with the smallest margins, which means apprenticeships, shop floor roles and junior office posts.
The BCC also cut its growth forecast for the year to 1%. That matches the Office for Budget Responsibility’s March forecast of 1.1%.
The inflation behind it
Inflation is the other problem. The Bank of England has held interest rates at 3.75% and the BCC warns it may keep them there until 2028. Rates are stuck because prices are still rising. Prices are still rising because the Bank of England spent more than a decade printing money and holding interest rates close to zero. Hundreds of billions of new pounds were created out of nothing during that period. The pound in your pocket buys less as a result. The war in the Middle East and higher energy costs have made things worse, but they are not the root cause. The root cause is the money itself.
Manufacturers reported the fastest rise in input costs in nearly four years in May, according to the S&P Global Manufacturing PMI. Firms reported rising prices for chemicals, plastics and food, linked to the energy shock from the US-Iran war. The sector still grew, with the index at 53.9, but S&P Global’s Rob Dobson said the expansion was ‘in doubt’ because much of it came from customers front-loading orders before prices climbed further.
Sanjay Raja, chief UK economist at Deutsche Bank, predicted ‘another wave of unemployment’ this summer and said the economy would ‘barely grow’ for the rest of the year. He pointed to political uncertainty and the autumn Budget as reasons households and firms would hold back on spending.
A lost generation
Former Labour health secretary Alan Milburn, who is leading a government-commissioned review of youth unemployment, warned last week that Britain faced a ’lost generation’ without urgent reform. His interim report projects the number of young people not in education, employment or training could reach 1.25 million by the early 2030s.
Shadow business secretary Andrew Griffith said the Government ‘must reverse some of the tax hikes that are crushing families and businesses’.
The BCC is funded by member subscriptions, not public money. Its quarterly survey of business leaders is one of the largest in the country. The Milburn review is publicly funded through the Department for Work and Pensions.
The Telegraph’s original report did not set out that the unemployment rate was already at 5.0% before the BCC forecast was published, nor that the Bank of England’s own years of cheap money have left the economy exposed to the current price shock.
