The UK economy faces mounting challenges as new analyses indicate a looming cost of living crisis accompanied by significant job losses ahead. Recent reports suggest that up to 163,000 jobs could be shed this year amid deteriorating consumer confidence and rising living expenses.

The ongoing conflict between the United States and Israel in the Middle East has disrupted global supply chains, leading to increased prices for food, fuel, and utilities. These pressures have strained household budgets, pushing consumer sentiment to unprecedented lows and edging the country closer to a technical recession.

According to the latest quarterly consumer barometer from PwC UK, which surveyed 2,068 individuals, consumer sentiment declined sharply by 12 points to -13 in April. This marks the steepest quarterly drop since mid-2022 and negates the modest economic progress observed earlier this year. The survey found that nine in ten consumers are deeply concerned about the escalating cost of living and the overall economic outlook, with 80% of households reducing discretionary spending in response.

Young adults appear to be disproportionately affected. Since the outbreak of the conflict on February 28, the proportion of adults under 35 who consider themselves “financially healthy” has fallen by 20%. Nearly one in ten reported falling behind on utility bills for the first time. Additionally, the share of consumers planning to drive less to mitigate soaring fuel costs doubled to 24% over the past three months.

Sam Waller, PwC UK's leader of industry for consumer markets, cautioned that consumer sentiment is expected to worsen before any improvement occurs as households brace for higher energy and food expenses later in the year.

The consumer outlook is further compounded by the spring employment forecast from the EY Item Club, which projects a 0.4% decline in national employment—equivalent to 163,000 job losses. The report highlights that job cuts have already begun in manufacturing and construction, with similar reductions anticipated in retail and hospitality sectors. The employment downturn is expected to particularly affect industrial and lower-income regions such as South Wales, Humber, and cities including Newcastle, Belfast, and Birmingham, where residents typically have less savings and allocate a greater share of income to essential costs like energy and food.

A government spokesperson acknowledged the challenges, noting that unemployment had initially fallen below 5% at the start of the year, with 332,000 more people employed than a year prior. However, the spokesperson conceded that the effects of the Middle East conflict were likely to lead to increased prices and pressure on employment in the months ahead. The government announced plans to reduce energy bills by up to 25% for 10,000 manufacturers and reiterated its commitment to achieving clean power by 2030, aiming to stabilize energy costs for businesses and households in the long term.