Britain to suffer biggest rise in unemployment in G7, OECD warns

Britain will suffer the biggest rise in unemployment of any major advanced economy as higher minimum wages put employers off hiring, the OECD has warned.

In the latest damning verdict on Labour’s economic policies, the Paris-based body predicts that joblessness will soar from 4.8 per cent last year to 5.5 per cent in 2026.

That is equivalent to an increase of around 250,000 in the dole queue.

The Organisation for Economic Cooperation and Development report said demand for workers had ‘continued to slow, especially in sectors most exposed to higher minimum wages’.

It echoes a series of warning from employers that the sharp rise in minimum wages is reducing entry-level job opportunities. That is seen as a key factor in the surge in the number of young people not in employment, education or training (NEETs) to more than one million.

While some other members of the G7 group of advanced economies – notably France – suffer from higher unemployment rates overall, none are projected to see the jobless rate jump as sharply as the UK this year.

The international report warns that Donald Trump’s war in Iran ‘has become the dominant force shaping the global economic outlook’ which is ‘again under pressure’ as energy supplies from the Middle East are choked off.

In Britain, that will mean growth weakening from 1.4 per cent last year to 0.9 per cent this year amid a slump in consumer confidence.

And inflation is expected to jump from 3.4 per cent to 3.7 per cent – the joint highest in the G7.

The report also notes that rising UK borrowing costs on bond markets are feeding through to ‘sizeable increases’ in mortgage costs – bigger than those seen in Germany and the US.

And it echoes previous warnings that the UK’s reliance on imported gas remains a key risk exposing Britain to global energy price shocks.

However, the report offers a crumb of comfort for Chancellor Rachel Reeves as inflation and growth projections are slightly improved compared to the OECD’s last report in March.

In a statement, Ms Reeves responded: ‘The conflict in the Middle East poses a significant challenge to the world economy.

‘Despite this, the OECD now expects UK inflation to be lower and growth higher than previously thought.

‘We have the right economic plan, and changing course would put that progress at risk, with families and businesses paying the price.’