UK Unemployment Hits Five-Year High in 2025 Rates!
Bank of England, raising questions about the accuracy of recent employment statistics.The UK unemployment rate has climbed to its highest level in nearly five years, according to the latest figures released by the Office for National Statistics (ONS). The data shows that unemployment rose to 5.2% in the three months to December 2025, up from 5.1% in the previous three-month period.
Youth Unemployment Reaches Decade High
Young people are experiencing the sharpest impact of the labor market slowdown. Unemployment among 16- to 24-year-olds surged to 16.1%, marking the highest rate in more than a decade. The increase highlights growing concerns about limited entry-level opportunities and rising competition for graduate roles.
Recent graduate Lucy Gabb, who completed a degree in French at Cambridge University in July 2025, says she has struggled to secure a publishing job despite submitting over 50 applications. Like many young job seekers, she reports receiving few responses and facing intense competition for junior positions.
Businesses Slow Hiring Amid Rising Costs
Many UK businesses have reduced recruitment activity, citing increased operational costs following policy changes introduced in Chancellor Rachel Reeves’s recent Budgets. These include higher employer National Insurance contributions and an increase in the minimum wage.
Work and Pensions Secretary Pat McFadden acknowledged that “more needs to be done” to help people into employment, particularly young job seekers. He emphasized that the government is working to expand apprenticeship opportunities.
However, opposition figures have strongly criticized the government’s economic management. Conservative MP Helen Whately argued that rising unemployment is the “predictable result of bad decisions,” claiming that higher hiring costs are limiting opportunities for school leavers and graduates.
Meanwhile, Daisy Cooper, Treasury spokesperson for the Liberal Democrats, has called for an emergency VAT cut for the hospitality sector, one of the industries most affected by recent job losses.
Retail Jobs Fall While Healthcare Grows
The ONS data shows that the retail and wholesale sector experienced the largest decline in payroll employment, with 65,000 jobs lost since January 2025. In contrast, the health and social care sector recorded the strongest growth, adding 39,000 new jobs over the same period.
Financial analyst Danni Hewson suggested that some workers leaving retail may be transitioning into healthcare roles, as both sectors employ a significant proportion of women. However, she warned that growing investment in artificial intelligence (AI) could further reduce entry-level positions, potentially affecting young workers most severely.
Wage Growth Slows but Still Outpaces Inflation
Average annual wage growth eased to 4.2% in the three months to December, down from 4.4% in the previous period. Despite the slowdown, wages continue to rise faster than inflation, which currently stands at 3.4%, above the government’s 2% target.
Some economists believe that easing wage growth could increase the likelihood of interest rate cuts by the Bank of England at its upcoming March meeting. Lower interest rates are often used to stimulate economic activity when inflation pressures begin to ease.
Paul Dales, chief UK economist at Capital Economics, noted that the moderation in wage growth suggests the central bank may still have “at least a couple more interest rate cuts” available.
ONS Data Under Scrutiny
The reliability of the ONS labor market data has faced repeated criticism, including from the Bank of England, raising questions about the accuracy of recent employment statistics.
