Daily Mail request: Why will UK redundancies increase again in 2026?

We have only scratched the surface of AI adoption. Larger firms are already investing heavily, but much of the UK’s small business base has yet to follow. A tougher economic backdrop may force that shift. As cost pressures build, businesses are likely to turn to AI for efficiency, which could mean leaner teams and reduced headcount.

UK businesses are facing something of a perfect storm, with higher National Insurance, rising minimum wages pushing up pay across the board, new employment costs and still-elevated borrowing and overheads all feeding through at once. The real issue is that these aren’t isolated pressures—together they can turn a previously profitable business into a marginal one, which is when employers start looking at cost-cutting, including redundancies.

There had been some hope that falling interest rates would ease that pressure, but geopolitical tensions such as the Iran situation could delay rate cuts and keep financing costs higher for longer. Continued cost pressures are likely to drive more restructuring, particularly in sectors already operating on tight margins, which will lead to job losses. The hospitality sector is likely to be one of the most affected.

Sadly, the worst is yet to come as the Iran conflict will be significant catalyst for UK redundancies in 2026. As oil prices surge, energy-intensive sectors like manufacturing and logistics face unsustainable margins, while reduced consumer spending hits retail and hospitality. Simultaneously, high interest rates, kept elevated by the Bank of England to fight war-driven inflation will prevent firms from refinancing debt, often forcing liquidations. But even without the geopolitical situation, domestic pressures are mounting. The April 2025 National Insurance hike to 15% and the lowered £5,000 threshold have made low-wage staff significantly more expensive, prompting many firms to trim headcount to stay solvent. 2026 also marks an AI "tipping point" where automated agents are actively replacing junior admin roles. Combined with the new Employment Rights Act increasing the "cost of hiring," these factors create a perfect storm for structural job losses.

The Iran war will trigger redundancies because businesses can't absorb another shock. Supply chains break, energy costs spike, revenue drops. Manufacturing, logistics, construction, hospitality get hit first. Then add the employer National Insurance hike in April. Small businesses are already on the edge. They can't take another cost increase, so they cut people. It's not a choice, it's survival. And AI makes it easier to justify. Why pay someone when software does it cheaper? Between war, tax hikes, and automation, we're not asking if redundancies will rise in 2026. We're asking how bad it gets. The businesses that survive will be smaller and leaner. A lot of people won't make the cut. Redundancies aren't a future risk. They're happening now, and they're about to get worse.

There's been mountung pressure on businesses over the past few years with increases to Employers National Insurance, Corporation Tax and heavier regulation.

We may see firms offering voluntary redundancy where they look to slim down their workforce.


This can present great opportunities for people to reconsider what's important to them, and whether they need to continue working, earning what they're earning, or if a positive change could be on the cards, for example early retirement or a shift to a less stressful job.