Britain’s unemployment rate climbed to 5%, its highest level in roughly four years, adding to expectations that the Bank of England (BoE) could come under renewed pressure to consider an interest-rate reduction following Rachel Reeves’s budget.
With just three weeks remaining before the Chancellor’s tax and spending statement, figures from the Office for National Statistics (ONS) showed unemployment reaching 5% in the three months to September 2025. The rate was up from 4.8% in the preceding quarter, while economists surveyed by the City had anticipated a rise to 4.9%.
The latest increase placed the number of unemployed people at around 1.8 million. A rate at this level had not been witnessed since January 2021. That was when the UK was still facing the economic disruption. It was caused then by the Covid-19 pandemic.
Simultaneously, wage growth appeared to be decreasing some of its earlier prowess. Besides, salary increments were claimed to have receded to their lowest pace since April 2022. It reflected that pressure within the employment market was becoming more pronounced.
Although earnings continued to remain above inflation, the advantage was narrowing. Real pay growth stood at 0.8% after accounting for Consumer Prices Index (CPI) inflation, compared with 0.9% during the previous three-month period.
Further evidence of softer employment conditions came from payroll data. The number of employees recorded on UK company payrolls fell by 32,000 in October to approximately 30.3 million. This followed a similar decline in September, while revised figures indicated that payroll employment had fallen across much of the preceding year.
ONS Director of Economic Statistics Liz McKeown said the overall figures suggested that the labour market was continuing to weaken.
There was, however, a modest improvement in vacancies. Available positions increased by 2,000, or 0.2%, reaching 723,000 during the three months to October.
The rise in unemployment, therefore, underlines mounting pressure across the UK labour market. With recruitment losing momentum and wage growth easing, policymakers face a growing challenge in supporting employment, safeguarding household incomes and restoring confidence in the wider economy.
