UK unemployment rate surges to 5-year high at 5.2%, youth hit hardest
&imwidth=600&imheight=450&format=webp&quality=medium "UK unemployment rate surges to 5-year high at 5.2%, youth hit hardest")
Representative image. Photograph: (Freepik)
Businesses in the UK argued that recent tax increases introduced by Rachel Reeves in her last two budgets have added pressure, mainly higher national insurance contributions and minimum wage hikes.
The UK's unemployment rate has risen to 5.2 per cent, reaching the highest level in nearly five years. It fueled expectations of a possible interest rate cut in the spring as pay growth continues to ease. The unemployment rate reached 5.2% in the three months ending December, the highest since the period to January 2021. The data matched economists' forecasts and rose from 5.1 per cent in the three months to November, according to the Office for National Statistics.
Since 2022, the UK has steadily experienced joblessness. In response, several businesses argued that recent tax increases introduced by Rachel Reeves in her last two budgets have added pressure, mainly higher national insurance contributions and minimum wage hikes.
Economists noted that younger workers are being hit hardest by the hiring slowdown. Joblessness among 18- to 24-year-olds rose to 14 per cent in the three months to December, the highest level in five years, or nearly 11 years excluding the pandemic, raising concerns that the UK is slipping in global rankings for youth employment.
“Higher labour costs, reflecting last year’s increase in employer NICs and rises in the adult minimum wage, appear to be weighing most heavily on entry-level hiring. At the same time, firms are likely reassessing junior roles in the face of rapid advances in AI," Martin Beck, the chief economist at WPI Strategy, said, the Guardian reported.
Wages in Great Britain increase
Till December 2025, average earnings in Great Britain excluding bonuses increased by 4.2 per cent, slowing from 4.4 per cent the previous month. Wage growth in the private-sector rosed to 3.4 per cent, marking the weakest level in 5 years, while public sector wages rose sharply by 7.2 per cent. Once adjusted for inflation, real annual pay excluding bonuses increased by just 0.8 per cent in October to December, marking the slowest rise since August 2023.
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The economics director at the Institute of Chartered Accountants in England and Wales, Suren Thiru, said, “This slackening in pay growth is likely to gather momentum in the coming months as the downward pressure from mounting lay-offs and higher employment costs increasingly weakens workers’ bargaining position.”
The number of employees on company payrolls continued to decline, falling by 134,000 compared with a year earlier and by 46,000 over the quarter. Payroll figures also dropped by 11,000 in January on a monthly basis. Meanwhile, the Office for National Statistics revised its earlier estimate of a steep monthly fall in December payrolls. What was initially reported as a drop of 43,000 from November was later adjusted to a much smaller decline of just 6,000.
