Is the UK’s Unemployment Rate Reaching a Five-Year High of 5.2% a Cause for Concern?

The latest official figures reveal that unemployment in the UK rose to 5.2% in the last quarter of 2025, its highest level in nearly five years. This increase comes alongside a decrease in annual wage growth, signalling a faltering economy where businesses are hesitant to hire due to rising costs. The situation is compounded by recent policy changes, including hikes in employer National Insurance contributions and a rise in the minimum wage, which some argue are making it more challenging for young job seekers to find entry-level positions.

Last updated: 24 October 2023 (BST)

What’s happening now

The UK's unemployment rate has reached 5.2% as of the last three months of 2025, up from 5.1% in the previous quarter. This increase highlights a broader trend of economic stagnation, where businesses are cutting back on hiring amid rising operational costs. The Office for National Statistics (ONS) has noted a reduction in wage growth to its lowest level in almost four years, suggesting that workers are facing increased financial pressures. The economic landscape is being shaped by several factors, including recent government policy changes and an overall decline in consumer confidence.

Key takeaways

Unemployment in the UK has risen to 5.2%, the highest rate in nearly five years.
Annual wage growth has hit its lowest level in almost four years.
Higher costs and recent tax increases have led businesses to slow hiring.

Timeline: how we got here

The rise in unemployment has been gradual, with significant milestones including:

2024: Introduction of the budget by Chancellor Rachel Reeves, which included increased National Insurance contributions for employers.
October 2025: ONS reported a rise in unemployment to 5.2%.
Throughout 2025: A noted decline in wage growth and increased redundancy rates.

What’s new vs what’s known

New today/this week

The latest ONS figures have confirmed an increase in the unemployment rate alongside a drop in wage growth. This reflects a broader trend of economic vulnerability and a rise in the number of unemployed individuals actively seeking work.

What was already established

It has been increasingly evident that businesses are facing operational challenges, leading to reduced hiring and more redundancies. Economic analysts had been predicting these trends, given the ongoing financial pressures affecting various sectors.

Impact for the UK

Consumers and households

For consumers, the rise in unemployment may lead to decreased household income and spending power, as job security diminishes. This is particularly concerning for younger individuals entering the job market, as entry-level roles are reportedly disappearing due to increased hiring costs.

Businesses and jobs

Businesses are feeling the impact of rising costs and reduced demand, which has resulted in a slowdown in hiring. The increase in employer National Insurance contributions may deter companies from recruiting, leading to a more stagnant job market. Furthermore, the number of job vacancies has remained stable, but the ratio of unemployed individuals to available positions has reached a post-pandemic high.

Policy and regulation

The UK government’s recent fiscal policies, particularly regarding National Insurance and minimum wage increases, are under scrutiny. Critics argue these measures could exacerbate unemployment, especially among young job seekers. Future discussions and consultations on these policies will be crucial in shaping the labour market's recovery.

Numbers that matter

5.2%: Current unemployment rate, the highest in nearly five years.
5.1%: Unemployment rate in the previous quarter.
Lowest wage growth in nearly four years: Reflecting broader economic challenges.

Definitions and jargon buster

National Insurance: A system of taxes paid by workers and employers to fund state benefits.
Wage growth: The rate at which wages increase over time, indicating economic health.
Redundancy: A situation where an employee's job is no longer necessary, often leading to job loss.

How to think about the next steps

Near term (0–4 weeks)

In the coming weeks, businesses may continue to assess their hiring strategies in light of rising costs and tax implications. Consumers should prepare for potential changes in employment opportunities and household income.

Medium term (1–6 months)

As the economic landscape evolves, watching for potential policy adjustments or government interventions will be essential. Businesses may seek to adapt to new regulations while consumers may need to adjust budgets accordingly.

Signals to watch

Changes in the unemployment rate over the next few months.
Shifts in wage growth trends and consumer spending behaviour.
Policy updates from the government regarding employment and taxation.

Practical guidance

Do

Stay informed about job market trends and economic policies.
Consider upskilling or reskilling to enhance employability.
Evaluate personal finances in light of potential job instability.

Don’t

Ignore signs of economic downturn; be proactive in job searching.
Assume the job market will recover quickly without changes in policy.
Neglect networking opportunities that could lead to new job prospects.

Checklist

Review your CV and update it with relevant skills.
Research industries that are still hiring despite overall unemployment rises.
Join professional groups or forums to expand your network.
Monitor government announcements regarding employment regulations.

Risks, caveats, and uncertainties

While the current unemployment rates and wage growth indicators provide a snapshot of the economy, these figures can be influenced by various factors, including government policies, global economic trends, and consumer confidence. Future changes in these areas could significantly alter the current trajectory of the job market and overall economic health.

Bottom line

The rise in unemployment to 5.2% signifies a troubling trend for the UK economy, compounded by falling wage growth and increased hiring costs. As both consumers and businesses navigate these challenges, understanding the broader economic landscape will be essential for future planning and decision-making.

FAQs

What is the current unemployment rate in the UK?

The current unemployment rate in the UK has risen to 5.2%, marking the highest level in nearly five years.

How has wage growth been affected?

Wage growth has fallen to its lowest level in almost four years, indicating increased financial pressures on workers.

What factors are contributing to rising unemployment?

Factors include increased operational costs for businesses, higher employer National Insurance contributions, and a reduction in consumer spending.