Soaring energy prices and disrupted trade are forcing firms to scale back hiring, according to the British Office for National Statistics

UK employers axed 100,000 jobs in April, the steepest monthly drop in five years and the latest sign that a weakening labor market is being dragged down by the prolonged conflict in Iran.

Data released by the UK’s Office for National Statistics (ONS) on Tuesday showed employers struggling with soaring energy costs after oil and gas prices jumped following the effective closure of the Strait of Hormuz during the US-Israeli military campaign against Iran.

Tax data showed the number of payrolled employees in Britain fell by 100,000 in April, after a revised decline of 28,000 in March, a drop far steeper than economists’ forecasts for a fall of 10,000.

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The ONS said the decline was the biggest since May 2020 at the start of the Covid-19 pandemic, particularly at the beginning of the tax year in April.

The figures added to evidence of a weakening labor market since the end of 2025, with the ONS revising down its estimates for the previous four months. The agency’s director of economic statistics, Liz McKeown, said retail accounted for much of the fall, adding to signs businesses are scaling back hiring as economic uncertainty deepens.

Separate ONS data showed the unemployment rate in the UK rose to 5% in the three months to March from 4.9% previously, defying expectations for it to remain unchanged, while wage growth slowed.

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Suren Thiru, chief economist at the Institute of Chartered Accountants in England and Wales, told The Guardian the figures signaled “growing distress” in UK’s labor market as rising costs and the fallout from the Iran war pushed businesses to “reduce recruitment and limit pay awards.”

Earlier this year, the International Monetary Fund warned the UK is “especially exposed” to the Middle East conflict because of its reliance on gas-fired power.

According to a recent Reuters estimate, the US-Israeli war on Iran has already cost global businesses at least $25 billion. European firms accounted for the largest share of downgraded forecasts as soaring energy prices and supply chain disruptions hit companies across the region. Many are based in the EU and Britain, where energy costs were already elevated after the bloc reduced Russian oil and gas imports following the escalation of the Ukraine conflict.