The UK’s unemployment rate reached an almost five-year high of 5.2% in the last three months of 2025.
Data from the Office of National Statistics (ONS) showed it increased from the 5.1% recorded in the three months to November.
For young people aged 18-24, the unemployment rate was 14%, the highest since 2020.
ONS director of economic statistics Liz McKeown said the figures reflected “weak hiring activity”.
She added: “The number of vacancies has remained broadly stable since the middle of last year. Alongside rising unemployment this means that the number of unemployed people per vacancy has increased, reaching a new post-pandemic high. Meanwhile, redundancies are also showing an upward trend.”
Many employers have reduced recruitment as a result of the government’s increases to employer National Insurance contributions and the minimum wage. Several businesses are also acting cautiously on hiring due to the introduction of reforms in the Employment Rights Act.
New data from CIPD released this week showed three in four employers expect the Act to increase employment costs, and more than a third plan to reduce the recruitment of permanent staff due to one or more of the key reforms.
Political reaction
Work and pensions secretary Pat McFadden said:
“Today’s figures show there are 381,000 more people in work since the start of 2025, but we know there is more to do to get people into jobs.
“Our £1.5 billion drive to tackle youth unemployment is a key priority and this month we announced that we’ll make it easier for young people to find and secure an apprenticeship, which comes on top of our investment to create 50,000 new apprenticeships.”
Conservative shadow chancellor Mel Stride said:
“Higher taxes, including a tax on jobs, soaring business rates, and anti-business red tape that piles on risk, is making it harder to employ people.
“Labour’s front bench has no real-world business experience and it’s showing.”
Liberal Democrat Treasury spokesperson Daisy Cooper said:
“It’s workers who are paying the price for the government’s failures.
“From the damaging jobs tax to the betrayal on business rates, small and high streets across the UK are fighting to stay afloat, let alone grow.”
Reaction of business groups and others to unemployment rate at a near five-year high
James Cockett, senior labour market economist, CIPD:
“It’s necessary for the government to take greater action to support young people in securing training and employment opportunities. It can do this by introducing an Apprenticeship Guarantee for 16 to 24-year-olds, which is overwhelmingly supported by employers.
“While vacancies have slightly risen, redundancies remain high, highlighting the pressures employers currently face in a tough economic environment. It’s expected that the introduction of Employment Rights Act measures will further increase employment costs, adding to the subdued mood among employers.
“It’s vital that government acts to mitigate against the unintended consequences of the reforms, such as a rise in temporary employment, by undertaking meaningful consultation with businesses and where necessary compromising on key measures still to be decided in secondary legislation.
“To support smaller businesses, the backbone of the economy, we need to see a major communication campaign from government, to ensure they aware of, understand and can prepare for the new legal obligations prior to them coming in to effect.”
Alex Hall-Chen, principal policy advisor for employment, Institute of Directors, said:
“The best way to boost employment is to make it less risky and less costly for businesses to hire staff. Every major employment reform over the past year and a half – the Employment Rights Act, above-inflation increases to the National Living Wage, and the employer’s National Insurance hike – has had the opposite effect. The business community has consistently highlighted the negative impact which these reforms will have on hiring, but the government has so far not shown that it is committed to addressing the majority of employers’ concerns.
“If the government is serious about increasing employment, particularly for groups currently furthest away from the labour market, it must take concrete steps to strengthen the business case for hiring. A welcome first step would be to use secondary legislation to make the Employment Rights Act more workable for businesses, for example, by exempting all SMEs from trade union access provisions and increasing the reference period for the guaranteed hours entitlement to 52 weeks.”
Patrick Milnes, head of people and work policy, British Chambers of Commerce, said:
“There are strong signs that the labour market is continuing to loosen as wage growth including bonuses has eased to 4.2% and the rate of unemployment has risen to 5.2%.
“Wage growth is being propped up by the public sector and the number of unemployed people per vacancy now sits at 2.6, the highest in more than 10 years if the pandemic period is excluded.
“Last year, businesses were hit hard by the increase in National Insurance contributions, and many are now facing further rises in the National Living Wage alongside higher business rates. Our research shows that labour costs remain the biggest cost pressure for businesses, cited by 72% of businesses.
“Against this background it is unsurprising they are holding off hiring. Especially as the imminent introduction of new Employment Rights legislation adds additional complexity to the picture.
“While the Spring Statement will provide a fuller update on the economic outlook, businesses are clear they want to see concrete action to reduce costs, boost exports and encourage investment.”
Kevin Fitzgerald, UK managing director, Employment Hero, said:
“Today’s ONS employment data is that latest demonstration of the UK’s tightening labour market.
“While the rise in vacancies is encouraging and suggests demand is still there, employers are hiring carefully. Costs are climbing, April’s Employment Rights reforms are looming and confidence remains fragile. That makes every hiring decision slower and more deliberate.
“Small businesses drive the majority of employment in the UK. If they feel confident, they hire but if they feel squeezed, they pause. The focus now has to be on giving SMEs the certainty and flexibility they need to keep creating jobs.”
Adam Hoyes, senior asset allocation analyst, Rathbones, said:
“The UK labour market data released today shows clearer signs of a weakening labour market feeding through to slower pay growth, which will give the Bank of England more confidence in cutting interest rates over the course of this year.
“After shedding 121,000 (0.4%) of employees over the course of 2025, the early data suggest that UK firms continued to reduce headcount at the beginning of 2026. And looking across a broader range of data, there was clear evidence of the labour market continuing to weaken with slightly fewer vacancies, slightly more redundancies, and another uptick in the unemployment rate.
“The softening labour market has been a key concern for the more dovish members of the Bank of England’s Monetary Policy Committee for a while, but what may be more important for the convincing some of their more hawkish colleagues to join them in backing interest rate cuts is the latest slowdown in pay growth.”