UK unemployment hits highest rate for nearly five years

Unemployment in the UK rose to its highest rate in nearly five years at the end of 2025, official figures show.

The unemployment rate climbed to 5.2% in the three months to December, from 5.1% in the three months to November, the Office for National Statistics (ONS) said.

It came as annual wage growth slowed, dropping to its lowest level in almost four years.

But young people are bearing the brunt, with unemployment for those aged between 16 and 24 rising to its highest in more than 10 years.

The unemployment rate for 16-24 year olds sits at 16.1%, the ONS data shows.

It comes amid a dampening outlook for Britain's economy, with hiring slowing as businesses cut back in the face of higher costs.

Chancellor Rachel Reeves' 2024 Budget hiked employer National Insurance contributions and saw a rise in the minimum wage, leading some businesses to slow down hiring and replacing outgoing workers.

Work and Pensions Secretary Pat McFadden said there was "more to do to get people in to jobs", with tackling youth unemployment a key government priority.

He added Labour is making it easier for young people to get in to apprenticeships, as well as creating 50,000 new apprenticeships.

But the Conservatives said Labour had overseen "an unprecedented series of monthly unemployment increases" which were the "predictable result of bad decisions and economic incompetence".

Shadow work and pensions secretary Helen Whately said: "Young people are taking the hardest hit. Entry-level roles are the first to disappear from Labour's tax hikes. By making hiring more expensive and more risky, Labour are ensuring school leavers and graduates never even get a foot in the door."

Meanwhile former health secretary Alan Milburn told BBC Radio 4's Today programme young people are on a "downward escalator" of poor health, poor education and graduating "into the benefit system" as adults.

Lucy Gabb graduated from Cambridge university in July 2025 with a degree in French and has since been looking for a job. She's looking to get into publishing.

"Entry level jobs are just so competitive and they're asking for experience that is just impossible to get whilst you're also studying," she told the BBC.

She is currently working a café job in London whilst also applying for graduate and entry level roles.

She says she has applied for over 50 roles.

Out of all the job applications she has done, only one has resulted in a face to face interview - mostly, she says, she gets no reply at all or a fairly quick rejection.

"All my friends are talking about is the job search, it can be really soul-destroying when you study for so long and you don't get anywhere", she said.

The ONS said the figures reflected "weak hiring activity", but also that more people who are out of work are now looking for jobs.

Economic statistics director Liz McKeown said: "The number of vacancies has remained broadly stable since the middle of last year.

"Alongside rising unemployment this means that the number of unemployed people per vacancy has increased, reaching a new post-pandemic high.

"Meanwhile, redundancies are also showing an upward trend."

Paul Dales, chief UK economist at Capital Economics, said the further fall in wage growth "supports the idea that the Bank of England has at least a couple more interest rate cuts in its locker".

The Bank uses interest rates as a tool to cool inflation, the rate at which prices rise, which is currently above the 2% target set for it by the government.

The slowdown in wage growth to 4.2% came despite inflation-busting pay awards for public sector workers, where average pay grew by 7.2%, said Alice Haine, personal finance analyst at wealth management firm Evelyn Partners.

But taking inflation in to account, actual average pay growth was 0.8%.

Some analysts are concerned about the surge in investment in artificial intelligence, which they say may boost the UK's productivity in the short term but could lead to longer-term job losses.

Danni Hewson, head of financial analysis at investment platform AJ Bell, warned that for young people in particular, who are already struggling to get their first taste of work, "AI could result in a scarcity of entry level posts."

But Hewson added that cooling inflation and falling interest rates "should help boost" business confidence and "kickstart a period of renewed growth".

The UK's current rate of inflation is 3.4%. The next set of figures will be released on Wednesday.

The reliability of the ONS's job market data has been repeatedly criticised, including by the Bank of England.

Additional reporting by Hannah Mullane