{"id":278088,"date":"2026-02-03T06:47:10","date_gmt":"2026-02-03T06:47:10","guid":{"rendered":"https:\/\/www.newsbeep.com\/ie\/278088\/"},"modified":"2026-02-03T06:47:10","modified_gmt":"2026-02-03T06:47:10","slug":"unemployment-to-reach-five-year-high-under-rachel-reeves-as-budget-tax-raid-hits-firms","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/ie\/278088\/","title":{"rendered":"Unemployment to reach five-year high under Rachel Reeves as Budget tax raid hits firms"},"content":{"rendered":"

Britain’s jobless rate is set to climb to its highest point in half a decade during the opening months of 2026, according to fresh projections from the EY Item Club released today.<\/p>\n

The forecasting group anticipates unemployment reaching 5.2 per cent in the first half of this year, driven by weakening economic momentum and reductions in government workforce numbers.<\/p>\n

November’s figures already showed the rate had risen to 5.1 per cent, following tepid GDP expansion and mounting costs for businesses.<\/p>\n

The EY Item Club expects conditions to improve thereafter, with unemployment projected to retreat to 4.7 per cent by 2028.<\/p>\n

Workers can expect their pay packets to grow more slowly in the coming months, with wage increases forecast to moderate to approximately 3 per cent.<\/p>\n

This deceleration stems from the rise in employer National Insurance Contributions working its way through the economy.<\/p>\n

Combined with climbing joblessness and the ongoing freeze on income tax thresholds, household finances face a squeeze.<\/p>\n

The EY Item Club projects that real income growth will contract from one per cent to just 0.8 per cent over the course of 2026.<\/p>\n

\"TaxesTaxes threaten business owners | GETTY<\/p>\n

These pressures on take-home pay arrive as families already contend with elevated living costs across essential goods and services.<\/p>\n

Economic output is expected to expand by just 0.9 per cent this year, marking a notable slowdown from the 1.4 per cent growth forecast for 2025.<\/p>\n

Tax increases and spending reductions are weighing heavily on activity, with private sector investment anticipated to contract by 0.2 per cent as companies face mounting pressure.<\/p>\n

The strain on smaller enterprises has been particularly acute, with research from wealth manager Rathbones revealing that one in five small businesses cut staff during 2025.<\/p>\n

\"Unemployment<\/p>\n

Unemployment has hit 5.1 per cent<\/p>\n

| GETTY<\/p>\n

Nearly six in ten SMEs attributed redundancies to escalating costs, including business rates and National Insurance Contributions.<\/p>\n

Separate analysis from Begbies Traynor last week identified 67,369 companies in critical financial distress during the final quarter of 2025.<\/p>\n

Matt Swannell, chief economic advisor to the EY Item Club, said: “The Autumn Budget saw the Government build a healthier degree of fiscal headroom, although some of the more substantial measures won’t take effect for a couple years.”<\/p>\n

\"RachelRachel Reeves has been accused of turning the UK economy into a ‘zombie apocalypse’ | GETTY \/ PA <\/p>\n

He noted that while additional tax rises may not materialise this year, previously announced measures will begin generating revenue as ministers work to reduce borrowing and maintain spending discipline.<\/p>\n

The Bank of England is widely anticipated to hold rates at 3.75 per cent when it announces its decision on Thursday.<\/p>\n

The EY Item Club expects one further cut in April as inflation moves towards the two per cent target by mid-year.<\/p>\n","protected":false},"excerpt":{"rendered":"Britain’s jobless rate is set to climb to its highest point in half a decade during the opening…\n","protected":false},"author":2,"featured_media":278089,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[72,113,61,60,1087,40822,5066],"class_list":["post-278088","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-business","tag-economy","tag-ie","tag-ireland","tag-money","tag-sgg","tag-tax"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts\/278088","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/comments?post=278088"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts\/278088\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/media\/278089"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/media?parent=278088"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/categories?post=278088"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/tags?post=278088"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}