“Spiralling energy costs and disruption to supply chains will push the UK to the brink of a technical recession in the middle of this year,” said Matt Swannell, a key participant in the latest economic assessment.
The UK economy faces significant challenges. A quarter of a million people could lose their jobs by mid-2027, according to projections. The EY Item Club forecasts that unemployment will rise to 5.8%, up from the current rate of 5.2%.
Growth is also expected to decline sharply. The economy is projected to grow by only 0.7% in 2026, down from 1.4% in 2025. This slowdown raises concerns about a potential technical recession.
The International Monetary Fund (IMF) has warned that the UK is experiencing the biggest growth downgrade among G7 countries. CFOs reported that geopolitical developments represent the greatest external risk to their businesses, indicating widespread uncertainty.
Confidence among chief financial officers has slumped significantly, reaching a net -57% between March 16 and March 30, 2026. This reflects a broader sentiment of concern regarding future economic conditions.
“Consumers’ spending power will be squeezed, while more expensive financing arrangements and a less certain global economic backdrop will pour cold water on companies’ investment plans,” Swannell added.
Inflation is expected to rise as well, with projections nearing 4% in the second half of 2026. This could further strain household budgets and affect overall economic activity.
Ian Stewart noted that “rarely in the last 16 years have UK CFOs been more focused on cost control than today.” The immediate priority for finance leaders is to strengthen balance sheets amid these external headwinds.
The ongoing conflict in Iran has compounded these issues, impacting business confidence and economic forecasts across the UK.
Details remain unconfirmed on specific policy responses or measures that might mitigate these risks as businesses prepare for an uncertain future.
