Britain is expected to see the largest increase in unemployment among the world’s leading economies over the next year as economic growth slows and pressure on the labour market intensifies.
The Organisation for Economic Co-operation and Development (OECD), an international organisation that advises governments on economic policy, forecasts that the UK’s unemployment rate will rise from 5 percent to 5.5 percent this year. That would represent the biggest increase among G7 nations.
The OECD also predicts that UK economic growth will slow to 0.9 percent in 2026, down from 1.4 percent last year, with higher energy prices and global uncertainty continuing to weigh on business activity.
Growth slowdown raises concerns for employers
The forecast suggests employers may face a more challenging operating environment in the months ahead as demand weakens and hiring activity slows.
According to the OECD’s latest economic outlook, the UK economy is expected to grow by less than 1 percent this year before recovering slightly to 1.1 percent in 2027, assuming disruption to global energy supplies eases.
Inflation is forecast to reach 3.7 percent this year, while restrictive interest rates are expected to continue dampening labour market activity. The OECD said these conditions would contribute to a rise in unemployment.
The increase would leave the UK with a higher unemployment rate than Germany, the United States and Japan, according to OECD projections.
A softer jobs market could bring a mixed picture for HR professionals. Recruitment pressures may ease in some sectors as more candidates become available, but organisations may also face renewed pressure to manage costs, workforce planning and employee engagement during a period of slower growth.
OECD backs continued fiscal restraint
The OECD urged the government to maintain its current approach to public finances, arguing that continued efforts to reduce borrowing remain necessary despite the weaker outlook.
The organisation said a combination of revenue-raising measures, spending controls and investment designed to improve productivity would help strengthen the UK’s economic resilience. It also called for progress on infrastructure planning reforms and changes to financial services regulation.
Chancellor Rachel Reeves said the conflict in the Middle East continued to present challenges for the global economy but noted that the OECD’s latest forecasts were more positive than earlier projections for both UK growth and inflation.
The OECD said global growth is also expected to slow, warning that a prolonged disruption to energy supplies could further weaken economic activity and increase the risk of recession in some countries.
While unemployment remains relatively low by historical standards, the forecast points to a more difficult period ahead for the labour market after several years in which employers struggled with persistent skills shortages and recruitment challenges.
William Furney is a Managing Editor at Black and White Trading Ltd based in Kingston upon Hull, UK. He is a prolific author and contributor at Workplace Wellbeing Professional, with over 127 published posts covering HR, employee engagement, and workplace wellbeing topics. His writing focuses on contemporary employment issues including pension schemes, employee health, financial struggles affecting workers, and broader workplace trends.
- William Furney
- William Furney
- William Furney
- William Furney
