Unemployment in the United Kingdom reached its highest level in nearly five years at the end of 2025, official figures show, with young people facing the most severe impact. The Office for National Statistics (ONS) reported that the jobless rate rose to 5.2 percent in the three months to December, up from 5.1 percent in the previous quarter. For those aged 16 to 24, the rate climbed to 16.1 percent, the highest in over a decade.
While wages continue to rise faster than inflation, the pace of growth has slowed. Many businesses have curtailed hiring, citing rising costs linked to recent policy changes, including higher employer National Insurance contributions and an increase in the minimum wage introduced in Chancellor Rachel Reeves’s last two Budgets.
Work and Pensions Secretary Pat McFadden said the government remains focused on reducing unemployment, especially among young people. “There is more to do to get people into jobs,” he told the BBC, noting efforts to expand apprenticeship opportunities for school leavers and graduates.
Opposition parties have criticised Labour’s handling of the job market. 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.” Liberal Democrat Treasury spokesperson Daisy Cooper called for an emergency VAT cut for the hospitality sector, which has been particularly affected.
Former health secretary Alan Milburn described the challenges facing young people as a “downward escalator,” warning that poor health, limited education, and early entry into the benefit system could become long-term patterns for this generation.
Graduates like Lucy Gabb, who earned a degree in French from Cambridge University in 2025, are experiencing these difficulties firsthand. Since graduating, she has applied for more than 50 publishing roles while working a café job in London, receiving only one in-person interview. “Entry-level jobs are just so competitive, and they’re asking for experience that is impossible to get while studying,” she said. “It can be really soul destroying when you study for so long and don’t get anywhere.”
ONS data also highlighted sectoral shifts in employment. The retail and wholesale sector lost 65,000 jobs since January 2025, while health and social work added 39,000 positions. Financial analyst Danni Hewson suggested some workers leaving retail are moving into healthcare, noting the crossover in workforce demographics, particularly among women. She cautioned, however, that growing automation and artificial intelligence investment could further reduce entry-level opportunities for young workers.
Average annual wage growth slowed to 4.2 percent in the three months to December, down from 4.4 percent in November. Economists say the slowdown may give the Bank of England room to cut interest rates in March to support the economy, with inflation currently at 3.4 percent, above the government’s 2 percent target.
The ONS’s employment figures are based on three-month averages, and some analysts warn that small sample sizes could affect accuracy.
