UK Economy Heading to Recession by Mid-2027

UK – The UK economy is heading for a recession as 250,000 jobs are at risk by mid-2027, according to an analysis on Monday.

Forecasts from EY Item Club indicate that the economy is expected to flatline in the second and third quarters of this year, raising the risk of a technical recession, defined as two consecutive quarters of contraction.

The group projected that economic growth would slow from 1.4% in 2025 to 0.7% this year, while unemployment is forecast to rise to 5.8% by mid-2027, up from the current 5.2%.

“Spiraling 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, chief economic adviser at EY Item Club.

“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,” he noted.

A separate report by Deloitte found that finance chiefs at major UK companies are already cutting spending, a move that is likely to weigh on economic activity and hiring.

Confidence among chief financial officers dropped to a net minus 57% in late March, down from minus 13% in the previous quarter, marking the lowest level since the start of the COVID-19 pandemic.

“Finance leaders are coping with high levels of external uncertainty, and their focus is on managing risks from geopolitics, rising energy prices, and higher financing costs,” said Ian Stewart, chief economist at Deloitte UK.

Executives identified energy costs, inflation, interest rates, and cyberattacks among the main risks facing businesses over the next three years.

The reports also showed a shift toward defensive financial strategies, with firms prioritizing cost control and cash preservation, while expectations for investment and hiring have weakened.

“Rarely in the last 16 years have UK CFOs been more focused on cost control than today,” Stewart said, adding that companies are strengthening balance sheets in response to external pressures.