The UK’s unemployment rate has climbed to 4.6% in the three months leading up to April, marking its highest level since July 2021. According to the Office for National Statistics (ONS), this increase is attributed to businesses being hit by a UK tax rise and US tariffs. The ONS reported that the number of people on payrolls fell notably, with 109,000 fewer workers in May, the largest drop since the Covid pandemic.
Liz McKeown, ONS director of economic statistics, noted that “there continues to be weakening in the labour market, with the number of people on payroll falling notably.” She added that feedback from the vacancies survey suggests some firms may be holding back from recruiting new workers or replacing people when they move on.
The labour market slowdown is further evidenced by a decline in job vacancies, which dropped by 63,000 over the three months to the end of May. Analysts attribute this trend to the increase in employer national insurance contributions and the national living wage.
Ruth Gregory, deputy chief UK economist at Capital Economics research group, expects the Bank of England to continue cutting interest rates into 2026, potentially lowering them to 3.50% next year. She stated, “With payrolls falling, the unemployment rate climbing and wage growth easing, today’s labour market release leaves us more confident in our view that the Bank of England will cut interest rates further than investors expect.”
The Bank of England last trimmed borrowing costs in May by a quarter point to 4.25%. As the labour market continues to cool, economists are watching for further developments, including the potential impact on consumer confidence and retail.
The UK unemployment rate has been steadily increasing, reaching 4.6% in the latest figures for February to April 2025. This uptick is reflected in the rising number of people unemployed, with both men and women experiencing higher unemployment rates, currently standing at 4.7% and 4.5% respectively. Despite the challenging labor market, wage growth has remained strong, outpacing inflation with a notable increase in real terms.