Britain’s jobs market is facing its toughest stretch in years, with the latest figures from the Office for National Statistics (ONS) painting a sobering picture. Unemployment in the UK climbed to 5.1% in the three months to October 2025, reaching its highest level since early 2021 and marking nearly five years since joblessness was this widespread, according to Bloomberg and BBC reports. The data, released ahead of a highly anticipated Bank of England (BoE) interest rate decision, has prompted concern across industries and among policymakers, especially as young workers bear the brunt of the downturn.
The ONS data shows that not only is overall unemployment rising, but the hardest hit are those just starting out in their careers. Youth unemployment recorded its sharpest increase in nearly two years, with 85,000 more 18- to 24-year-olds out of work over the three months ending October 2025. That’s the largest jump since November 2022, and it’s left many graduates and school leavers struggling to find their footing. As Liz McKeown, ONS director of economic statistics, put it, “the fall in payroll numbers and increase in unemployment has been seen particularly among some younger age groups.”
It’s not just joblessness on the rise. The number of employees on payrolls fell by an above-expectation 38,000 in November, according to the BBC and The Spectator, bringing total job losses to 187,000 since November last year. Redundancies have surged to their highest level since the pandemic, and vacancies, after a brief uptick, have begun to slide again. This, as Richard Carter, head of fixed interest research at Quilter Cheviot, observed, is because “businesses slammed the brakes on hiring ahead of the budget, and the Chancellor’s measures haven’t tempted them to restart.”
What’s driving this malaise? Employers across sectors cite policy uncertainty and rising employment costs as key reasons for slowing hiring, particularly at the entry level. The government’s £25 billion increase in employer National Insurance contributions and hikes to the minimum wage have made hiring inexperienced workers less attractive, especially for businesses already grappling with higher costs. Proposals to scrap the two-tier minimum wage and move to a single adult rate are also raising alarms, with some warning it could further discourage opportunities for those just entering the workforce.
This policy environment is having a tangible impact on the ground. According to The Spectator, “it has become increasingly untenable for the Chancellor to continue to deny that both her £25 billion raid on employer National Insurance and the increases in minimum wage are contributing to not only a weakening labour market but an economy where it is becoming tricky for young people to find work.” The result is a growing sense of unease about the future for Britain’s youth, with many fearing a slide into welfare dependency if the trend isn’t reversed.
Wage growth, meanwhile, presents a mixed picture. Average earnings excluding bonuses rose 4.6% between August and October, but that’s a slowdown from earlier in the year. Private sector pay growth eased to 3.9%—the weakest since the end of 2020—while public sector wage growth accelerated to 7.6%, reflecting earlier-than-usual government pay deals. The ONS highlighted this divergence, noting, “wage growth slowed further in the private sector, while increasing again in the public sector.” This gap underscores the uneven conditions across the workforce, with the state sector expanding while private employers pull back.
Despite the gloom, there are bright spots—most notably in the fintech sector. According to a joint report by Morgan McKinley and Vacancysoft, London is bucking the trend, with fintech vacancies forecast to grow by 37% year-on-year and the capital accounting for 70% of all fintech roles nationwide. Regional markets aren’t left out either, with hiring expected to rise by 16%. The report credits lower interest rates and streamlined regulation for restoring confidence in the industry. Risk and compliance roles are booming, up nearly 26% year-on-year, particularly in financial crime and credit risk, where demand has more than doubled. IT remains a cornerstone of fintech hiring, with vacancies projected to rise by 35% in 2026, especially for developers, engineers, analytics, and cybersecurity specialists.
Michael Moretti, Director of Technology at Morgan McKinley, summed up the mood: “London is powering a new wave of fintech expansion. After a cautious couple of years, firms are now hiring with renewed conviction, especially across technology and compliance. The surge in demand for developers, engineers and specialist risk experts shows the sector is doubling down on innovation, resilience and scale. This is a clear signal that UK fintech is entering its next phase of growth, with London at the centre of it.”
But for the broader economy, the outlook remains cloudy. The BoE is widely expected to cut interest rates by a quarter-point on Thursday, December 18, 2025, in a bid to support the slowing economy. Financial markets have already priced in the move, and investors are watching closely for any signals about the central bank’s future plans. Inflation, meanwhile, is expected to have slowed to 3.5% in November from 3.6% in October, according to forecasts cited by Reuters, but remains almost double the BoE’s 2% target. Policymakers are thus caught between the need to tame inflation and the imperative to revive a faltering jobs market.
The reliability of the ONS’s data has itself come under scrutiny, with reviews highlighting low response rates to the Labour Force Survey—just one in four businesses responded this month. Still, the broad trends are hard to ignore: hiring is slowing, payroll numbers are falling, and redundancies are on the rise. The Department for Work and Pensions has taken note, appointing former health secretary Alan Milburn to lead a review into the drivers behind the increase in young people not in education, employment, or training.
As the government weighs its next steps, the stakes couldn’t be higher. The divergence between public and private sector fortunes, the disproportionate impact on young workers, and the nascent recovery in some high-tech industries all point to a complicated road ahead. The choices made now—on tax, wage policy, and support for innovation—will shape the UK’s economic landscape for years to come.
For now, the numbers tell a story of a jobs market under pressure, with the promise of fintech-fueled growth offering a glimmer of hope amid broader uncertainty. Whether that hope can be extended to the rest of the workforce remains the pivotal question as Britain heads into 2026.
