THE UK unemployment rate has risen in the three months to March as the pressure stemming from the Iran war begins to show in economic reports.
The Office for National Statistics (ONS) published its labour market figures on Tuesday, which show a slight rise in unemployment, with the rate hitting 5%.
This is up from 4.9% in the three months to February, while the number of job openings and growth of regular earnings have also dipped.
The ONS estimates suggest the number of job openings fell by 28,000, or 3.9%, to 705,000 between February and April, its lowest level since April 2021.
In Scotland, the unemployment rate remained lower than the UK’s – despite the number of people in work falling by 34,000 over the last three months.
Official figures for January to March 2026 showed 123,000 Scots were jobless, giving an unemployment rate of 4.4%.
But Scotland’s employment rate was lower than the overall UK’s, 2,646,000 people in work – 34,000 less than October to December 2025 and a drop of 16,000 compared with the first three months of last year.
Scotland now has an employment rate of 73.7%, the data showed, with this below the rate of 75% recorded across the UK as a whole.
Regular wage growth in the three months to March 2026 was 3.4% excluding bonuses, down from 3.6% the previous period. Including bonuses the rate was 4.1%, up from 3.9% in the previous period. Read the release ➡ https://t.co/x7OSJRL70F pic.twitter.com/oxgmb8CSCN
— Office for National Statistics (ONS) (@ONS) May 19, 2026
This decrease is largely being driven by the hospitality and retail sectors, the ONS's director of economic statistics, Liz McKeown, has said.
She explained: “Latest figures suggest the labour market remains soft, with vacancies at their lowest level in five years and unemployment higher than a year ago.
"The number of payroll employees continued to fall in the three months to March, while regular wage growth slowed further.
“Lower-paying sectors such as hospitality and retail have seen some of the largest falls in vacancies and payroll numbers, both in recent months and over the last year."
Economic analysts believe that the downturn in the economy is coming from the impacts of the Iran war, which has caused uncertainty in the markets and driven inflation as fuel costs have risen.
Richard Carter, head of fixed interest research at Quilter Cheviot, said the outlook suggested a similar pattern of falling payroll number could continue "for some time".
"Today's figures only capture the initial effects of the conflict, and the full impact will become more apparent in the coming months as higher costs and the potential for weaker consumer demand begin to filter through," he said.
Suren Thiru, chief economist for chartered accountants in England and Wales body ICAEW, said the jobs figures showed there was a "growing distress within the UK's labour market".
"The continued fall in job vacancies is a worrying sign of the strength of the labour market as it suggests that demand for staff is deteriorating quickly amid global headwinds and the growing financial squeeze on firms," she added.
Meanwhile, Kevin Brown, a savings expert at insurance firm Scottish Friendly, commented: "Despite the economy outperforming expectations in the first quarter, today's labour market figures show the jobs market continues to struggle."
"The bigger near-term threat to people's finances is what's happening in the Middle East. Therefore, households could look to make their finances more resilient by shopping around for the best energy tariffs and savings rates and asking whether their money could be working a lot harder for them in markets," he added.
Secretary of State for Work and Pensions, Pat McFadden, said: "Today's figures show there were 416,000 more people in work than there was this time last year.
"While this is encouraging, we know the conflict in the Middle East is casting a shadow on the labour market.
“However, thanks to the choices we have made, we are in a stronger position to deal with the continuing volatility and costs of the war in Iran with our economy ranking as the fastest growing of any European G7 country last year.
“Boosting opportunity and tackling youth unemployment in every area remains our priority," he added.
