UK Unemployment Rate Climbs to 5.2% as Labour Policies Impact Hiring Market

UK Unemployment Rate Rises to 5.2% Amid Labour Policy Concerns

Good morning and welcome to the latest financial update from the City. The UK unemployment rate has climbed once again, with new data from the Office for National Statistics revealing a significant increase to 5.2% for the three months ending in December 2025. This marks a rise from the previous quarter's 5.1% and exceeds earlier estimates, highlighting ongoing challenges in the labour market.

Job Losses and Economic Statistics

According to the ONS report, approximately 6,000 jobs were shed between November and December 2025. Liz McKeown, director of economic statistics at the ONS, commented on the situation, stating, "The number of workers on payroll fell further in the final quarter of the year, reflecting weak hiring activity, although it is largely unchanged in the latest month." This persistent unemployment issue continues to be a major concern for the Labour government, which has struggled to address it effectively.

Youth Unemployment and Minimum Wage Impact

In a recent development, Bank of England rate-setter Catherine Mann issued a stark warning regarding the impact of minimum wage increases on youth unemployment. In an interview with the Sunday Telegraph, Mann explained that the rise in youth unemployment is largely due to "disproportionately big increases in the minimum wage for that age group," rather than indicating a broader collapse in the labour market.

Supporting this view, OECD figures show that the unemployment rate for individuals aged 16 to 24 has surged to around 15%, surpassing the EU average for the first time since records began in 2000. Mann cautioned against interpreting this trend as a sign of deeper labour market deterioration, emphasizing the need for careful analysis.

Minimum Wage Increases and Future Plans

Over the past three years, minimum pay for 21 to 22-year-olds has increased by 33%, aligning it with the £12.71 hourly national living wage for older workers. Similarly, the rate for 18 to 20-year-olds has risen by 46% to £10 per hour, with a further increase to £10.85 scheduled for April. Despite these hikes, the government remains committed to fully aligning the 18-20 rate with the adult rate, raising questions about potential further uncertainty in the hiring market.