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Britain’s unemployment rate rose to 5.2% in the three months to December 2025, the highest level in nearly five years, according to data released Tuesday by the Office for National Statistics.
The figure represents an increase from 5.1% in the three months to November, signaling a continued softening in the UK labor market. The data also revealed a slowdown in wage growth, which fell to its lowest level in almost four years.
The rise in unemployment coincides with a period of dampened economic growth and reduced hiring activity as businesses contend with increased costs. Chancellor Rachel Reeves’ 2024 Budget, which increased employer National Insurance contributions and raised the minimum wage, has been cited as a contributing factor to the slowdown in hiring, with some companies delaying replacements for departing workers.
Conservative lawmakers attributed the increase to “bad decisions and economic incompetence” by the Labour government, claiming an “unprecedented series of monthly unemployment increases.” Shadow operate and pensions secretary Helen Whately countered that young people are disproportionately affected, with entry-level positions disappearing due to the tax increases.
The impact of the rising unemployment is already being felt by recent graduates. Lucy Gabb, who graduated from Cambridge University in July 2025 with a degree in French, has been seeking a position in publishing but faces intense competition and employer demands for experience unattainable during studies. She currently works in a café while continuing her job search, having applied for over 50 roles with limited success – receiving only one invitation to an in-person interview.
Economists are now assessing the implications for monetary policy. The City money markets indicate a near-75% chance that the Bank of England will lower interest rates to 3.5% at its next meeting in March, up from 69% the previous night. Investors anticipate two rate cuts by Christmas, bringing the Bank Rate down to 3.25%.
James Smith, a developed markets economist at ING, stated that the jobs report keeps the Bank of England “firmly on track” for a March rate cut. He noted that the weakness is concentrated in consumer-facing industries, a legacy of the National Insurance and National Living Wage increases. Despite a decline in hospitality employment, it remains 2% higher than pre-COVID levels, though economic output is 6% lower, suggesting further job losses may occur.
Yael Selfin, chief economist at KPMG UK, suggested the fall in pay growth to 4.2% strengthens the case for a March interest rate cut, stating that the Bank of England may want to minimize downside risks to the labor market and lower rates ahead of its April forecast meeting.
The unemployment figures define those without work as actively seeking employment and available to start within two weeks. Individuals who do not meet these criteria are categorized as “economically inactive,” encompassing students, retirees, and those with long-term illnesses or disabilities.
