Job losses forecast for south Wales linked to fallout from Iran war

Nation.Cymru staff 

South Wales is expected to suffer some of the worst job losses in Britain as the economic fallout from the Iran war continues to hit manufacturing and construction industries, according to a new report.

Economic forecasters at the Item Club predict that 5,700 jobs will be lost in south Wales during 2026, with the region identified as one of the most vulnerable parts of the UK because of its reliance on energy-intensive industries.

The report warns that rising fuel and energy costs, combined with supply chain disruption linked to the conflict in the Middle East, are likely to hit lower-income regions hardest. Only the Humber is forecast to face comparable difficulties.

Tim Lyne, economic adviser to the Item Club, said: “Some of the lowest income regions will feel the biggest effects of the manufacturing and construction sectors reducing headcount in the face of rising energy prices and supply chain disruption.

“While consumers in these areas typically have less rainy-day savings, which will reduce spending in the retail and hospitality sectors.”

Across the UK as a whole, the report forecasts a net loss of 163,000 jobs this year, equivalent to a 0.4% fall in employment.

The slowdown is expected to be driven by weaker consumer spending and sharp increases in the cost of fuel, energy, materials and food ingredients, alongside disruption to international shipping routes.

The report also warns that the wider cost-of-living squeeze could deepen existing inequalities between regions.

Lower-income households are expected to be particularly exposed because they spend a greater proportion of their income on essentials such as food and energy.

The findings come amid growing concerns about the wider economic impact of the Iran conflict on the UK.

Economic impact

Last month, the Bank of England warned unemployment could rise to 5.6% this year under its more pessimistic scenario for the war’s economic impact, up from 5.2% currently.

While publicly funded sectors such as health, education and public administration are expected to continue recruiting staff, the Item Club said this would not be enough to offset wider private sector losses.

The report predicts that retail and hospitality will also come under pressure as households cut back on discretionary spending.

London is forecast to lose 25,000 jobs this year, with further losses expected in Birmingham, Leeds and Glasgow.

However, some areas are expected to prove more resilient, with Cambridge forecast to see employment growth because of the strength of its technology sector.

Mr Lyne said south Wales remained particularly exposed because of the pressures facing manufacturers: “Across the UK, the jobs market is going to soften, but it’s looking especially fragile in South Wales and the Humber as they’re particularly exposed to manufacturing businesses that are seeing big increases in their costs of materials.”