Young workers hit hard as UK unemployment rate rises to 5.1%

The UK unemployment rate rose to 5.1% in the three months to October, with younger workers particularly affected, official data shows.

This time last year the unemployment rate was 4.3%, illustrating a trend of an increasing number of people out of work, official data from the Office for National Statistics (ONS) shows.

The number of unemployed 18 to 24-year-olds increased by 85,000 in the three months to October, the largest rise since November 2022.

Many businesses have said the government’s pledge to scrap the two-tier minimum wage and create a new rate for all adults will make them less inclined to hire young workers with little or no experience.

The ONS figures, which cover the period before the Budget, reflect the decision by many employers to slow down or freeze hiring until they knew the Chancellor Rachel Reeves’s plans for taxation and spending.

Many firms have also said that they are still feeling the effects of last year’s Budget, when national insurance rises made hiring more expensive.

Estimates for employees on company payrolls dropped by 149,000, or 0.5%, in October compared with the previous year.

Liz McKeown, the ONS director of economic statistics, said the figures indicate “a weakening labour market”.

The quality of ONS statistics has been criticised recently, with a review calling into question the quality of the economic data it produces.

The Labour Force Survey consistently sees low response rates. Only one in four of businesses responded to this month’s survey.

The Department for Work and Pensions announced on Tuesday that former Health Secretary Alan Milburn will lead a review into the drivers of rising youth unemployment.

Mr Milburn has named a panel of health, business and policy experts, dubbed a “coalition of the concerned” to examine the soaring numbers of young people who are not in education, employment or training.

Meerah Nakaayi is 22 and from London. She did a two-year apprenticeship in policy and then worked in the sector for two years, but has been out of work since June.

Meerah said: “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.”

James Reed, the chief executive of Reed Recruitment, told BBC Radio 4’s Today programme that “the economics of hiring at entry level is becoming less and less appealing to employers”.

The government has pledged to scrap the two-tier minimum wage and create a new rate for all adults.

But many businesses have said this will make them less inclined to hire young workers with little or no experience.

Kris Gumbrell, the chief executive of Brewhouse and Kitchen chain of pubs, said the hospitality industry feels “punished” by government policy.

Mr Gumbrell said he posted a job advert recently for a front-of-house role which got 200 applications in a few hours.

“It’s young people that have suffered the most,” he said, adding that the government’s new plans for apprenticeships don’t work for the hospitality sector.

The UK unemployment rate is now at its highest level since January 2021, just below the peak rate seen during the Covid-19 pandemic.

For those in work, wages are still rising faster than prices but pay growth is slowing at companies.

Average wage growth was 4.6%, excluding bonuses, between August and October 2025. However, the picture is different for public- and private-sector workers because pay rises for those employed by the government took effect earlier this year than in 2024.

Earnings growth in private companies slowed from 4.2% to 3.9% but accelerated for the public sector employees from 6.6% to 7.6%, compared with the prior three-month period.

The Bank of England is due to make a decision on Thursday on whether to cut interest rates or hold them at 4%.

Yael Selfin, chief economist at KPMG UK, said a rate cut is now likely.

“The latest evidence from the labour market should be sufficient to justify a rate cut later this week,” she said.

However, inflation in the UK is currently 3.6%, ahead of the Bank’s target of 2%. Lower interest rates can fuel inflation as the cost of borrowing is lower.

Richard Carter, head of fixed interest research at Quilter Cheviot, said the Bank is “still walking a tightrope,” because it wants to encourage growth but also keep inflation tracking downward.

The ONS is due to publish the latest inflation figures on Wednesday.

“Should inflation come in lower as expected tomorrow, a rate cut could well be ticked off everyone’s Christmas list,” Mr Carter said.

Responding to the ONS figures, Secretary of State for Work and Pensions Pat McFadden said the data “underline the scale of the challenge we’ve inherited”.

“That is why we are investing £1.5bn to deliver 50,000 apprenticeships and 350,000 new workplace opportunities for young people – giving them real experience and a foot in the door.

Helen Whately, shadow work and pensions secretary, accused the government of implementing “growth-killing policies” that would lead to job losses in the run up to Christmas.

“Fourteen months in a row of higher unemployment means thousands of families will be struggling through the holiday season and without a steady income heading into the New Year.”