Britain faces a projected loss of 163,000 jobs this year, with lower-income regions set to bear the brunt of the economic fallout from the Iran war, a new report warns.

The Item Club’s latest regional outlook highlights south Wales and Humber, two of the UK’s most economically vulnerable areas, as those most likely to endure severe job market difficulties over the coming year.

These regions, heavily reliant on manufacturing and construction, are particularly susceptible to sharp increases in energy prices and supply chain disruptions stemming from the Middle East conflict. The report forecasts job reductions of 5,700 in south Wales and 2,800 in Humber by 2026.

Tim Lyne, economic adviser to the Item Club, explained: “Some of the lowest income regions will feel the biggest effects of the manufacturing and construction sectors reducing headcount in the face of rising energy prices and supply chain disruption.

“While consumers in these areas typically have less rainy-day savings, which will reduce spending in the retail and hospitality sectors.”

Overall, the report predicts a 0.4 per cent decline in UK employment this year, equating to 163,000 net job losses. This downturn is attributed to a pullback in consumer spending, escalating costs for fuel, energy, materials, and ingredients, alongside significant shipping disruptions.

The Bank of England recently cautioned that UK unemployment could climb to 5.6 per cent this year, up from its current 5.2 per cent, under its more pessimistic scenario regarding the war’s impact.

The Item Club further noted that as households curb discretionary spending amid a surging cost of living, the retail and hospitality sectors in Britain’s major cities will experience the most significant slowdowns.

London is expected to see a drop of 25,000 jobs, Birmingham 12,500, Leeds 9,800, and Glasgow 6,200, as these sectors contract.

However, the outlook isn’t entirely bleak, with Cambridge anticipated to experience employment growth in 2026, and Belfast and Edinburgh projected to face relatively limited job losses.

Mr Lyne added: “Across the UK, the jobs market is going to soften, but it’s looking especially fragile in south Wales and Humber as they’re particularly exposed to manufacturing businesses that are seeing big increases in their costs of materials. Resilience will come in places like Cambridge, where the tech sector is based.”

While publicly funded sectors, including education, public administration, and health and social work, are expected to increase hiring this year, these gains will not be sufficient to offset the broader job market contractions.

The report also issues a stark warning about a widening disparity in living standards across the UK, exacerbated by the Iran war.

Lower-income households are set to endure the steepest increases in the cost of living, as a larger proportion of their income is spent on essentials such as food, fuel, and energy bills, all of which are forecast to see substantial price hikes.

Cities like Newcastle, Belfast, and Birmingham see households dedicating up to 13 per cent of their disposable income to energy and food, significantly higher than the less than 9 per cent for an average London household.

This disparity leaves these cities particularly vulnerable if the Iran war continues unresolved, according to the Item Club.

A government spokesperson said: “Recent figures show that there was an improvement in the labour market at the beginning of the year with unemployment falling below 5 per cent, and 332,000 more people in work than a year ago.

“But we cannot escape the effects of the war in the Middle East, which are likely to feed through to prices and employment in the coming months.

“We will do everything we can to support the country through this period, including by slashing energy bills by up to 25 per cent for 10,000 manufacturers.

“Our mission for clean power by 2030 will get us off the rollercoaster of fossil fuel prices, to cut bills for businesses and households for good.”

Jewellery segment shares fell sharply on Monday after Prime Minister Narendra Modi’s call to cut gold purchases. Share prices of Senco Gold and Kalyan Jewellerys tumbled over 8% while Titan was down over 6%.Speaking in a rally earlier on Sunday, PM Modi called citizens to help preserve foreign exchange reserves. His appeal included avoiding unnecessary foreign travel, overseas vacations and weddings abroad, while favouring domestic tourism. He also called on people to avoid non-essential gold purchases for the next year to reduce pressure on foreign exchange outflows.The statement triggered a sharp sell-off in jewellery stocks, as investors racted to the potential impact on demand. Senco Gold was down 8.69% or 31 points to 333 on the BSE, Titan lost 6.45% or 291 points to trade at 4,222 as of 11:11 am. Kalyan Jewellers trimmed 8.3% to 389, and PC Jeweller declined 3.26% to 9.Meanwhile, Dalal Street also traded in red, with benchmark indices sliding amid a mix of geopolitical uncertainty, climbing oil prices, and renewed worries over foreign exchange conservation following Prime Minister Narendra Modi’s remarks.The BSE Sensex fell to 76,400.71, declining 927.48 points or 1.20% while the Nifty 50 was down to 23,916.35, shedding 259.80 points or 1.07%.Ajay Bagga, Banking and Market expert, said, “India is a different story and the PM in a public gathering spoke of the energy supply and price challenges for the Indian economy and the need to take measures to reduce energy dependence and imports while conserving foreign exchange. Indian markets are pointing to a weak open. Expectations of petrol and diesel price hikes this week are high as OMC losses are running at Rs 30,000 crores per month.“Bagga also flagged global geopolitical developments as a critical overhang for markets, particularly around the US-Iran situation. He said, “Markets are focusing on the AI/Big Tech momentum and ignoring the tail risks from a re-escalation from US- Iran. Netanyahu in an interview yesterday, said that he sees the Iran war as not over till Iran’s nuclear facilities are obliterated. The second-order conclusion is that China, which controls Iran, has not deemed it fit to help the Trump-Xi Summit by pressurising Iran to agree to at least a temporary truce.“On the implications for upcoming diplomatic developments, the expert added that this may temper hopes from the Trump-Xi Summit, saying, “expect Trump to transactionally try to blind side Xi, while the Chinese will come well prepared with countermeasures to keep the narrative in control.”Sujan Hajra, Chief Economist, Anand Rathi, said in a report that despite broader optimism, crude-related risks continued to shape investor caution. “Markets stayed optimistic, but nerves around crude never really left the room. Indian equities still ended higher, with broader markets outperforming as midcaps and smallcaps extended their strong rally. Autos and IT supported sentiment, while banks and metals struggled under earnings disappointments and rising global uncertainty.“He said India’s economic fundamentals remained firm, with stronger PMI trends and domestic demand offering support, but warned that elevated oil prices, logistical disruptions and tensions linked to the Strait of Hormuz were keeping inflation concerns in focus.“Central banks globally remained cautious on rate cuts as energy-led price pressures continued to complicate the outlook. Growth is holding up, but global risks are beginning to make resilience more expensive,” Hajra said.(Disclaimer: Recommendations and views on the stock market, other asset classes or personal finance management tips given by experts are their own. These opinions do not represent the views of The Times of India)