Unemployment is expected to rise at a far quicker rate this year – increasing from 4.75 per cent in 2025 to a peak of 5.3 per cent in 2026.
This is quite a significant rise, given that the last forecast in November had expected unemployment to only increase to 4.9 per cent this year.
The OBR has also raised its forecast for unemployment in 2027 to 4.9 per cent, from 4.6 per cent previously.
In its report, the fiscal watchdog said that “subdued hiring demand” meant that fewer jobs were available, with the Chancellor pointing out that more would be done to tackle unemployment, in particular, to help young workers into a career.
Long-term, the forecasts predict that the unemployment rate will fall gradually to 4.1 per cent by 2030/31.
The biggest barrier to this may remain the challenges business face when hiring. Experts, like the Bank of England, have suggested that the Government’s previous fiscal policies, including increases to the National Minimum Wage and the National Insurance hike, have caused employment costs to rise.