The United Kingdom is expected to face an extended period of sluggish economic growth accompanied by a significant rise in unemployment, according to a recent forecast from the ITEM Club. The economic outlook has been downgraded amid the fallout from escalating tensions between the United States and Iran, which has driven oil prices close to $100 per barrel, exacerbating energy costs and disrupting markets.

Using the Treasury’s economic model, the ITEM Club projects that UK growth will slow from 1.3 percent in 2025 to 0.9 percent this year, followed by a further decline to 0.7 percent in 2027. Inflation is anticipated to increase to 3.5 percent later this year, while the unemployment rate is expected to reach 5.7 percent. This rise in joblessness could add approximately 200,000 individuals to benefit claims, pushing the total number of unemployed above two million.

Matt Swannell, the chief economic adviser to the ITEM Club, cautioned that the economic environment remains challenging, emphasizing the persistent pressure from rising energy prices. He noted that these costs are straining both households and businesses during a period when consumer demand remains weak. Swannell elaborated that the UK economy is likely to experience a prolonged phase of weak growth rather than a sharp downturn.

The report highlights concern over the destabilizing impact of international geopolitical tensions on the domestic economy, particularly through energy market volatility. With inflation rising and joblessness increasing, policymakers face difficult decisions regarding support measures and economic stimulus to mitigate the anticipated slowdown.

The ITEM Club’s analysis underscores the broader uncertainties facing the UK economy amid global conflicts and persistent inflationary pressures. The forecast suggests that without significant improvements in international relations or energy prices, the UK may endure a challenging economic period over the next several years.