UK unemployment rises to 5%, highest since early 2021 ahead of budget

Britain’s unemployment rate increased to 5% in the third quarter, surpassing analysts’ expectations and reaching its highest level since early 2021, official data showed Tuesday. The rate rose from 4.7 per cent in the previous quarter, exceeding the consensus forecast of 4.9 per cent, the Office for National Statistics (ONS) reported.

Liz McKeown, ONS director of economic statistics, noted that “the number of people on payroll is falling, with revised tax data now showing falls in most of the last 12 months.” The figures highlight ongoing weakness in the UK labour market as the Labour government prepares its annual budget on November 26, amid slowing economic growth.

Economic pressures ahead of budget

The rising unemployment rate adds pressure on Prime Minister Keir Starmer’s Labour government, which is trailing in popularity polls 16 months after winning the general election. Isaac Stell, analyst at Wealth Club, said, “There will be no pre-budget comforts that can be taken from today’s employment data. Not only has the unemployment rate risen, but wage growth continues to shrink. With speculation around the budget reaching fever pitch, businesses have postponed hiring and are less likely to commit to any form of investment until they know where the economic land lies.”

Analysts also suggested the weak employment data increases the likelihood of the Bank of England reducing its main interest rate at its next monetary policy meeting in December, potentially easing some economic pressure. Finance Minister Rachel Reeves has indicated that the budget will include tax rises aimed at reducing government debt and funding public services.

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(With agency inputs)