Story Highlight
– UK unemployment rate rose to 5.2% in late 2025.
– Youth unemployment reached 16.1%, highest in over 10 years.
– Employers cite rising costs as reason for fewer hires.
– Labour criticized for increasing unemployment due to tax hikes.
– Wage growth slowed to 4.2% amid rising economic concerns.
Full Story
Unemployment figures in the United Kingdom have witnessed a concerning increase, reaching a level not seen in almost five years by the end of 2025, according to recent data released by the Office for National Statistics (ONS). The unemployment rate rose to 5.2% during the final quarter of last year, an increase from 5.1% in the preceding three-month period. Particularly alarming is the rise in unemployment among younger individuals, which surged to 16.1% for those aged 16 to 24, marking the highest rate in over a decade.
While wages for those in employment have been increasing, they are not keeping pace with rising living costs, and the rate of wage growth has begun to decelerate. Many employers are becoming hesitant to expand their workforce, with some attributing this reluctance to recent fiscal policies introduced by Chancellor Rachel Reeves in her last two budgets. In particular, they cite increased employer National Insurance contributions and an elevation in the minimum wage as factors that have added to their operational costs.
Pat McFadden, the Secretary of State for Work and Pensions, acknowledged the urgent need for initiatives aimed at enhancing job opportunities, particularly for young job seekers. McFadden emphasised that addressing youth unemployment is a critical priority for the government, noting that Labour is actively working to facilitate greater accessibility to apprenticeships for younger generations.
On the other hand, opposition voices from the Conservative Party argued that Labour’s policies have resulted in what they termed “an unprecedented series of monthly increases in unemployment.” Highlighting the precarious situation faced by young people, Shadow Work and Pensions Secretary Helen Whately underscored the impact of entry-level job losses, which she claimed have been exacerbated by Labour’s fiscal measures. “By making hiring more expensive and riskier,” she stated, “Labour are ensuring that school leavers and graduates never even get a foot in the door.”
Furthermore, Daisy Cooper, the Liberal Democrat Treasury spokesperson, has called for immediate relief for the hospitality sector—a crucial area experiencing significant job losses. Former Health Secretary Alan Milburn voiced his concerns on BBC Radio 4’s Today programme, stating that many young people today are subjected to a “downward escalator” of poor health and education, leading them to graduate into a reliance on social benefits.
Amidst these trends, stories from affected individuals highlight the personal toll of the employment crisis. Lucy Gabb, a recent graduate from Cambridge University with a degree in French, has faced considerable challenges in her quest for a position in the publishing industry. Currently employed part-time in a café in London, she has applied for over 50 positions, yet only managed to secure a single interview. Expressing the frustration shared by many peers, Gabb described the job search process as “soul destroying,” bemoaning the competitiveness of entry-level roles that often require experience that is difficult to obtain concurrently with studies.
The retail and wholesale sectors have experienced the most significant losses, with the ONS reporting a total of 65,000 jobs eliminated within the industry since January of the previous year. Conversely, the health and social work sectors have seen a growth in employment, adding approximately 39,000 positions in the year leading up to January.
Danni Hewson, a financial analyst at AJ Bell, noted a trend of individuals transitioning from the retail field into healthcare, highlighting the significant employment of women in both sectors. However, Hewson cautioned that the burgeoning investment in artificial intelligence could pose further challenges for young job seekers, suggesting that it may lead to a scarcity of entry-level opportunities as automation takes a more prominent role in the workforce.
As wage growth hovered at an average annual rate of 4.2% by December—down from 4.4% the prior month—economists are watching closely for its potential implications. Some believe that a reduction in wage growth could prompt the Bank of England to consider cutting interest rates in their next meeting scheduled for March. The Bank previously raised interest rates as a tactic to mitigate inflation, which currently stands at 3.4%, surpassing the government’s target of 2%.
Paul Dales, Chief UK Economist at Capital Economics, remarked that the slowdown in wage growth “supports the idea that the Bank of England has at least a couple more interest rate cuts in its locker.” Despite the ONS’s established role in generating employment data, the reliability of its figures has faced scrutiny, including from within the Bank of England itself.
The current unemployment landscape presents significant challenges, especially for young people stepping into the job market. With political responses varying and economic indicators suggesting a tightening environment, the outlook remains uncertain as policymakers grapple with the complexities of re energising the labour market and supporting those adversely affected by these trends.
Our Thoughts
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