No feelgood factor for Reeves as Iran war snuffs out economic upturn
Summary
The UK unemployment rate rose to 5% in March, reversing a recent fall, and this change reflects the impact of the war in Iran on the economy. Rising prices and weak wage growth are making life harder for many families, and the Bank of England is watching these trends closely to decide on interest rates.Key Facts
- UK unemployment increased back to 5% between January and March 2026 after briefly dropping to 4.9%.
- The war in Iran has caused a new rise in inflation and hurt business confidence in the UK.
- Data from HM Revenue & Customs showed a fall of 100,000 payrolled jobs in April, a large monthly drop since 2014.
- Annual payrolled job decline is 0.7%, the fastest in five years.
- Regular pay rose by 3.4% from January to March, the slowest pace since the Covid pandemic started.
- In the private sector, pay growth was only 3%, indicating weak wage increases despite rising prices.
- Slow wage growth may help prevent a wage-price spiral, where wages and prices keep pushing each other higher.
- The Bank of England’s policy committee is considering whether to raise interest rates, but weak job data may lead them to hold rates steady for now.
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