Labour warned unemployment could hit highest level in 14 years as 400,000 jobs vanish

More than 400,000 additional people will be out of work by the end of Labour’s first term, according to new forecasts.

The British Chambers of Commerce (BCC) warned the unemployment rate is expected to climb to 5.5 per cent by 2028, which would mark the highest level recorded since 2014.

Around 418,000 more people are projected to be unemployed by the close of 2028 compared with figures recorded at the end of 2024.

It would take the total number of unemployed people in Britain to around two million by the end of the decade as businesses continue to battle rising costs and weaker economic growth.

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Young workers are expected to face the toughest conditions, with the BCC warning that people aged between 16 and 24 are likely to bear the brunt of worsening job losses.

The organisation estimated that almost 167,000 additional young people could be without work by 2028 compared with the period immediately after Labour’s landslide election victory.

Youth unemployment, which currently stands at an 11-year high of 16.2 per cent, is forecast to rise further to 17.8 per cent, the highest level since 2013.

Business leaders surveyed by the BCC identified rising labour costs and the growing use of artificial intelligence as the main factors contributing to the loss of entry-level roles across several sectors.

Employers also pointed to Chancellor Rachel Reeves’s tax increases as an additional pressure on businesses already facing mounting workforce expenses.

David Bharier, head of research at the BCC, said: "The UK is not in recession but the economy remains trapped in a cycle where each recovery is interrupted before gaining traction and firms go back on the defensive.

"With youth unemployment approaching 18 per cent by mid-2027, the UK risks weakening the skills pipeline it needs for the next economy."

Shadow business secretary Andrew Griffith criticised the economic outlook and called on ministers to reverse tax rises introduced by Labour.

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Mr Griffith said: "Lower growth, higher inflation and more unemployment is not what the doctor ordered for the UK economy."

He added: "In fact, the only thing growing seems to be more bad news."

Mr Griffith urged Labour to reverse tax increases which he claimed were "crushing families and businesses".

The BCC also downgraded its economic growth forecast for 2026 to just one per cent as it warned of a weaker outlook for the wider economy.

The organisation said persistent inflationary pressures could force the Bank of England to keep interest rates at 3.75 per cent until 2028.

Sanjay Raja, chief UK economist at Deutsche Bank, also warned Britain could face "another wave of unemployment" over the summer months as growth remains subdued.

Mr Raja said: "The prospect of a leadership challenge and a very uncertain Budget will likely see households and business refrain from spending and investing in the coming quarters."

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