Britain faces a sobering unemployment forecast as Chancellor Rachel Reeves’ tax policies threaten to push jobless rates to their highest level in five years. According to fresh analysis from KPMG, the labour market deterioration presents a critical challenge for the new government’s economic strategy.
Unemployment Forecast Reaches Alarming Levels
KPMG’s latest unemployment forecast predicts the jobless rate will climb to 4.9% by 2026. This represents a significant increase from the current 4.7% and substantially exceeds last August’s 4.1% figure. The consultancy firm warns that labour market conditions show no signs of immediate improvement.
Tax Policies Driving Employment Concerns
Businesses are bracing for additional tax increases following Chancellor Reeves’ record £40bn tax raid on corporations. Key measures include:
- Employer National Insurance hikes labeled as a ‘jobs tax’
- Potential further levies on companies, landlords, and investors
- Frozen income tax thresholds generating £8bn in revenue
- Possible wealth, property, and dividend taxes
Economic Growth and Fiscal Challenges
The unemployment forecast coincides with modest GDP growth projections of 1.2% this year, slowing to 1.1% in 2026. Chancellor Reeves confronts a potential £50bn public finance shortfall exacerbated by weak growth and policy reversals. Meanwhile, businesses are delaying hiring decisions pending clarity from November’s Autumn Budget.
Political Reactions and Business Impact
Shadow Chancellor Mel Stride accuses Reeves of being ‘asleep at the wheel’ regarding economic management. However, the Treasury maintains its pro-business stance, highlighting trade agreements and corporation tax stability. The unemployment forecast suggests businesses face continued uncertainty amid evolving fiscal policies.
FAQs
What is the current unemployment forecast for the UK?
KPMG predicts unemployment will rise to 4.9% by 2026, up from the current 4.7% rate.
How are tax policies affecting employment?
Business tax increases, including higher employer National Insurance contributions, are creating hiring hesitancy among companies.
What economic growth is forecast alongside unemployment?
GDP growth is projected at 1.2% for this year, slowing to 1.1% in 2026 according to current analysis.
When will businesses get clarity on future tax policies?
The Autumn Budget in November is expected to provide definitive guidance on the government’s fiscal direction.
What solutions is the government considering for revenue generation?
Options include freezing income tax thresholds, wealth taxes, property levies, and potential windfall taxes on specific industries.
