UK Unemployment Rises to 5.1% as Youth Joblessness Hits 10-Year High

UK unemployment rises to 5.1% as youth joblessness hits a 10-year high, raising concerns over hiring, wages, and economic growth prospects.

UK Unemployment Climbs as Labour Market Weakens

UK unemployment rose to 5.1% in the three months ending October 2025, reflecting a sharp deterioration in labour market conditions, according to the latest data released by the Office for National Statistics (ONS). The increase marks the highest unemployment level recorded since early 2021 and highlights mounting pressure on young workers and low-income households.

The rise in UK unemployment comes as payroll employment continues to decline, vacancies fall, and businesses reduce hiring amid rising costs and subdued economic growth. The ONS said the latest figures confirm a sustained slowdown rather than a temporary fluctuation.

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Youth Unemployment Reaches a Decade High

The most severe impact of rising UK unemployment is being felt among young people. The unemployment rate for individuals aged 16 to 24 surged to 16%, the highest level in ten years. The total number of unemployed young people reached 735,000, with the 18–24 age group alone seeing an increase of 85,000 over the past year.

Liz McKeown, Director of Economic Statistics at the ONS, said the data shows “a weakening labour market with falling payroll employment and fewer job openings,” adding that the trend has persisted across multiple quarters.

Sectors that traditionally absorb young workers, including retail, hospitality, and accommodation, have been disproportionately affected. Industry data indicates that these sectors collectively shed nearly 130,000 jobs over the past 12 months, driven by reduced consumer demand and higher operating expenses.

Automation and AI Add Pressure on Entry-Level Jobs

Structural changes in the labour market are compounding the rise in UK unemployment, particularly for first-time jobseekers. Automation and artificial intelligence are increasingly replacing entry-level administrative and customer service roles that once provided pathways into employment for young workers.

Graduates and apprentices face growing competition for fewer roles. Meerah Nakaayi, a 22-year-old policy apprentice from London, said she faced nearly 300 applicants for a single entry-level position, many with prior experience, underscoring the tightening job market.

Economists warn that without targeted reskilling initiatives, technological disruption could further widen youth unemployment gaps over the next two years.

Government Announces £1.5 Billion Youth Employment Plan

In response to rising UK unemployment, the government announced a £1.5 billion employment support package aimed at boosting youth participation in the workforce. The plan includes funding for 50,000 new apprenticeships and 350,000 workplace training opportunities over the next year.

Work and Pensions Secretary Pat McFadden said the initiative would be supported by an independent review of youth unemployment led by former Health Secretary Alan Milburn. The review is expected to propose long-term labour market reforms.

However, businesses argue that rising costs may limit the effectiveness of these measures.

Employer Costs Rise as Hiring Becomes Less Attractive

Employers are facing mounting fiscal pressures following changes introduced in the October 2024 budget. National Insurance contributions for employers increased from 13.8% to 15%, while the National Living Wage is set to rise to £12.21 per hour in April 2026.

James Reed, Chief Executive of Reed Recruitment, warned that the combined impact of higher wages and taxes is reducing hiring appetite, particularly in entry-level roles. He noted that while wage increases protect living standards, they also strain business affordability.

Bank of England Faces Pressure to Cut Rates

The rise in UK unemployment is intensifying pressure on the Bank of England to ease monetary policy. Markets expect a 0.25 percentage point interest rate cut, which would bring the base rate down to 3.75%, in an effort to stimulate growth and support employment.

While average wage growth excluding bonuses slowed to 4.6%, it remains slightly above inflation, offering limited relief to households. Economists caution that continued weakness in hiring and investment could signal a prolonged economic slowdown.

Sarah Hewin, an economist at Standard Chartered, warned that failure to revive job creation within the next two quarters could increase the risk of a double-dip downturn.

Political Stakes Rise as Job Market Deteriorates

With UK unemployment now nearly one percentage point higher than when the Labour government took office in 2024, political scrutiny is intensifying. Critics argue that fiscal tightening and labour cost increases may have unintentionally worsened job prospects, particularly for younger workers.

As economic uncertainty persists, labour market performance is expected to become a central issue in upcoming political and policy debates.