- UK unemployment climbs to 4.7%, the highest since mid-2021, reflecting mounting economic pressure.
- Wage growth slows to 5%, the weakest pace in nearly three years.
- Rising joblessness and falling vacancies fuel expectations of a Bank of England rate cut in August.
The UK’s labour market is showing clear signs of distress as the unemployment rate rose to 4.7% in the three months to May—its highest level in four years—according to new data from the Office for National Statistics.
With the UK economy contracting for two consecutive months and vacancies falling to their lowest level in three years, businesses are scaling back hiring. Chancellor Rachel Reeves now faces mounting scrutiny over labour costs and regulatory pressures, which critics argue are stifling growth.
UK Jobs Crisis Deepens as Unemployment Rises and Wages Weaken
The private sector has borne the brunt of this downturn, with job creation slowing across industries, particularly in hospitality. Since October, the sector has lost approximately 84,000 jobs, highlighting the cumulative impact of inflation, energy prices, and tightening regulations. Employers cite increased costs related to pensions, employment law changes, and tax contributions as key barriers to expansion.
While inflation edged up to 3.6% in June—still above the Bank of England’s 2% target—the bigger concern for policymakers appears to be growth. GDP fell 0.3% in April and 0.1% in May, signalling a stagnating economy that could spiral into a recession if job losses persist. Rate cuts are now seen not as a question of “if” but “when” and “how deep.”
Economic groups, including the Federation of Small Businesses, argue that the government’s approach is counterproductive. FSB policy chair Tina McKenzie warned that “piling on costs through tax hikes and red tape” is discouraging hiring and investment. She called for a reassessment of fiscal policy to support business recovery and retain jobs.
Chancellor Reeves, while still early in her tenure, may have to reconsider her autumn budget strategy. Any tax increases will now be more politically and economically sensitive amid rising unemployment and shrinking consumer demand. The dilemma underscores the broader challenge of managing public finances while supporting a fragile recovery.
The UK’s rising unemployment and sluggish wage growth are clear signals of a labour market under duress. As pressure builds on policymakers, all eyes turn to the Bank of England’s next move.
“When the economy is shrinking, jobs don’t just disappear—they echo through communities.” – Adapted from economic commentary
