UK Unemployment Reaches Five-Year High of 5.2% in Late 2025

LONDON (Azat TV) – The United Kingdom’s unemployment rate climbed to 5.2% in the three months leading up to December 2025, marking its highest level in nearly five years. This significant increase, up from 5.1% in the preceding three months to November, signals deepening economic challenges and is intensifying speculation about further interest rate cuts by the Bank of England amidst cooling wage growth and persistent inflation concerns.

According to data released by the Office for National Statistics (ONS), the jobless rate reached a level not seen since January 2021. The rise in unemployment has been a steady trend since 2022, prompting economists and political figures to voice concerns over the nation’s economic trajectory. Analysts had anticipated this increase, reflecting broader strains on the UK labor market.

Economic Pressures and Wage Stagnation

The latest figures reveal a concurrent slowdown in wage growth, further exacerbating the economic picture. Wages, excluding bonuses, in Great Britain increased by 4.2% in the three months to December, a decrease from 4.4% reported the previous month. While public sector pay saw a substantial rise of 7.2%, private sector wages grew by a mere 3.4%, marking the lowest level in five years. When adjusted for inflation, annual pay excluding bonuses rose by a modest 0.8% from October to December, the lowest rate since August 2023, according to The Guardian.

The number of individuals on company payrolls also continued its downward trend, falling by 134,000 compared to a year ago and by 46,000 over the last quarter of 2025. Monthly figures for January showed a further decline of 11,000 payroll jobs. Liz McKeown, the director of economic statistics at the ONS, observed that the falling payroll numbers reflect weak hiring activity, even as more people who are out of work are actively seeking employment.

Policy Impact and Political Debate Over UK Unemployment

The rise in unemployment has sparked a political debate, with opposition parties attributing the downturn to the government’s recent economic policies. Chancellor Rachel Reeves’ 2024 Budget, which included hikes in employer National Insurance contributions and a rise in the minimum wage, has been cited by businesses as a contributing factor to slower hiring and reduced replacement of outgoing workers, as reported by the BBC.

The Conservatives have criticized Labour, stating they have overseen ‘an unprecedented series of monthly unemployment increases,’ which they describe as the ‘predictable result of bad decisions and economic incompetence.’ Shadow work and pensions secretary Helen Whately specifically highlighted the disproportionate impact on young people, arguing that ‘entry-level roles are the first to disappear from Labour’s tax hikes,’ making it harder for school leavers and graduates to enter the job market.

Youth Employment Crisis Deepens

Indeed, younger workers appear to be bearing the brunt of the current labor market challenges. The unemployment rate for 18- to 24-year-olds has surged by more than two percentage points to 14%, the highest in five years—or nearly 11 years if the pandemic period is excluded. Peter Dixon, a senior economist at the National Institute of Economic and Social Research, noted that a 33% rise in the minimum wage over the past two years has potentially priced younger workers out of the market.

The personal struggle is evident in stories like that of Lucy Gabb, a Cambridge University graduate from July 2025 who has been actively seeking a job in publishing. ‘Entry-level jobs are just so competitive and they’re asking for experience that is just impossible to get whilst you’re also studying,’ Gabb told the BBC, describing her experience of applying for over 50 roles with little success. She currently works in a café in London while continuing her arduous job search.

Bank of England’s Next Steps and Future Outlook

The weakening labor market, coupled with easing wage growth, is putting pressure on the Bank of England to consider further monetary policy adjustments. With inflation at 3.4% in December, up from 3.2% a month earlier but still above the Bank’s 2% target, the central bank kept interest rates on hold at 3.75% earlier this month. However, economists like Paul Dales, chief UK economist at Capital Economics, suggest the ‘lack of green shoots of recovery in the labour market and further fall in wage growth supports the idea that the Bank of England has at least a couple more interest rate cuts in its locker, with the chances of the next cut happening in March rather than April edging higher.’

The Bank of England has forecasted that the unemployment rate will rise further to 5.3% this year, with wage growth moderating to 3.25% by the end of 2026. While the overall picture remains challenging, some recent business surveys suggest a potential improvement in the jobs market for January, with companies renewing recruitment plans after budget uncertainties lifted. A report by KPMG and REC indicated the smallest drop in permanent staff placements in 18 months, and a Bank of England survey of chief financial officers found that firms expect to raise employment this year for the first time in five months, offering a glimmer of hope amidst the current economic headwinds.

The persistent rise in the UK unemployment rate to a five-year high, particularly impacting young workers, underscores a complex interplay of post-pandemic economic adjustments and recent fiscal policies, demanding careful navigation by policymakers to avoid long-term structural damage to the labor market.