UK unemployment has risen to 5.2%, its highest level in almost five years, according to the Office for National Statistics (ONS). The rate for the three months to December was up from 5.1% in the previous quarter and marks the highest level since early 2021.
Unemployment has been gradually increasing since 2022. Businesses have argued that higher costs, including recent rises in employers’ national insurance contributions and the minimum wage announced in recent budgets, have added pressure and slowed hiring.
Younger workers appear to be most affected. The unemployment rate for 18- to 24-year-olds reached 14% in the three months to December – the highest in five years, or nearly 11 years excluding the pandemic period. Economists have raised concerns about the UK’s position on youth employment compared with other countries.
Wage growth also continued to ease. Average pay excluding bonuses rose by 4.2% in the year to December, down from 4.4% the previous month. In the private sector, pay growth slowed to 3.4%, its weakest level in five years, while public sector wages increased by 7.2%. After adjusting for inflation, regular pay rose by just 0.8%, the lowest rate since August 2023.
Payroll numbers declined by 134,000 compared with a year earlier and by 46,000 over the quarter. January saw a further 11,000 fall. However, a previously reported sharp drop in December was revised from 43,000 to 6,000.
The latest figures strengthen expectations that the Bank of England could cut interest rates in the spring as wage pressures ease.
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