The United Kingdom’s job market is feeling the chill as the latest figures reveal a rise in unemployment to 5.1% in the three months leading up to October 2025—a notable jump from 5.0% in the previous quarter and well above the 4.1% rate recorded when Labour assumed office in 2024. According to official data from the Office for National Statistics (ONS), this uptick marks the highest national unemployment level since January 2021, apart from the exceptional circumstances of the pandemic.
While the national picture is concerning, the situation in London is particularly stark. The capital’s unemployment rate has climbed to 6.8%, its highest in more than a decade outside the pandemic, leaving 354,000 people actively searching for work. As reported by The Standard, London is now the region most affected by joblessness, outpacing the national average and raising questions about the city’s heavy reliance on retail and hospitality—sectors that have been especially hard hit in recent years.
Youth unemployment is also on the rise, with young people bearing the brunt of the downturn. The ONS data shows that the number of unemployed 18 to 24-year-olds soared by 85,000 in the three months to October, the largest increase since November 2022. Youth unemployment now stands at 13.4%, up from 12.7% the previous quarter and the highest since 2015 if the pandemic spike is excluded. This trend is echoed across the country, with many young job seekers reporting fierce competition for even entry-level roles.
Meerah Nakaayi, a 22-year-old from London, described her recent experience to the BBC: “The last six months have been incredibly frustrating and demotivating. My last interview feedback stated how they had 290 applications for a policy analyst role ... for a niche policy area. I think that just shows how competitive it really is out there.”
The challenges for young job seekers are compounded by changes in government policy. Employers, particularly in hospitality, say that recent national insurance increases and the introduction of a new minimum wage structure have made hiring entry-level workers less attractive. Kris Gumbrell, CEO of the Brewhouse and Kitchen pub chain, told the BBC: “It's young people that have suffered the most,” adding that the government’s new plans for apprenticeships “don’t work for the hospitality sector.”
Overall, the number of people out of work and classified as unemployed rose by 158,000 in the quarter and by 327,000 over the year, bringing the total to 1.832 million. The number of payrolled jobs fell by 171,000 (0.6%) in the year to November and by 38,000 (0.1%) on the month, settling at 30.3 million, according to provisional ONS data. Estimates for employees on company payrolls dropped by 149,000 in October compared to the previous year, further highlighting the labor market’s fragility.
Despite these setbacks, wage growth continues—albeit at a slower pace. Wages in the UK increased by 4.7% in October 2025 compared to the previous year, with average wage growth at 4.6% (excluding bonuses) between August and October. However, the story diverges between public and private sectors: private sector wage growth slowed from 4.2% to 3.9%, while public sector earnings surged from 6.6% to 7.6%. In real terms, after adjusting for inflation, total pay rose by 0.6% year-on-year, offering a small but meaningful buffer for workers grappling with rising living costs.
Vacancies, meanwhile, have held steady, with an estimated 729,000 job openings in the three months to November. The claimant count—a measure of people receiving unemployment-related benefits—rose slightly in November but remained lower than a year earlier, standing at about 1.68 million.
The government has acknowledged the seriousness of the situation, particularly for young people. Secretary of State for Work and Pensions Pat McFadden told The Standard: “There are over 350,000 more people in work this year and the rate of inactivity is at its joint lowest in over five years, but today’s figures underline the scale of the challenge we’ve inherited. That is why we are investing £1.5 billion to deliver 50,000 apprenticeships and 350,000 new workplace opportunities for young people—giving them real experience and a foot in the door.” The government has also launched an investigation into youth unemployment and inactivity, with Alan Milburn leading the review.
However, opposition voices have criticized the government’s approach. Shadow London minister Gareth Bacon argued, “We have a Labour government that has spent 18 months talking our economy down, ignoring industry, jacking up taxes, pushing up inflation and making it far more difficult for businesses to hire people. The increase in unemployment is a direct result and is likely to get worse because of government policies.” Liberal Democrat London spokesman Luke Taylor added, “Young people across the capital face black clouds over their future, faced with a hostile job market, extortionate rents and rising costs. Labour claims to be on the side of working people but it is clear that both the Mayor and the Government are woefully letting them down.”
Business leaders and economists have pointed to a “subdued labour market” and lingering uncertainty, especially as many firms paused hiring ahead of the latest Budget. Liz McKeown, ONS director of economic statistics, commented, “The figures indicate a weakening labour market. Young people were especially affected by the fall in payroll numbers and the rise in unemployment.”
With the Bank of England’s Monetary Policy Committee set to meet on December 18, 2025, speculation is rife about whether an interest rate cut is imminent. Most City forecasters expect a quarter-point reduction, which would bring the headline rate down to 3.75%—the lowest since February 2023. However, the final decision is likely to hinge on the latest inflation data, due out the day before the meeting. Suren Thiru, economics director at ICAEW, summed up the mood: “The UK labour market is facing a harsh winter with a perfect storm of surging business costs, including the impending minimum wage rise, and declining customer demand likely to lift unemployment unnervingly higher from here. The concerning pace at which the labour market is unravelling means that an interest rate cut on Thursday looks inevitable.”
As the UK heads into the holiday season, the rising tide of unemployment—especially among the nation’s youth—serves as a sobering reminder of the challenges ahead. With policymakers, businesses, and workers all waiting for signs of a turnaround, the coming months will test the resilience of the country’s labor market like never before.
