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UK unemployment rises to highest level in nearly four years At least 250,000 jobs lost since Rachel Reeves’s autumn budget, data shows
(about 5 hours later)
Wage growth cools more than expected as Rachel Reeves tax increases add to labour market slowdown Unemployment at highest level in nearly four years, with increase blamed on chancellor’s hike to businesses’ NICs
Reeves will hope weaker wage growth allows more interest rate cutsReeves will hope weaker wage growth allows more interest rate cuts
Business live – latest updatesBusiness live – latest updates
Unemployment in the UK rose in April to the highest level in almost four years, official figures showed, as tax increases introduced by Rachel Reeves added to a broader slowdown in the jobs market. More than a quarter of a million jobs have been lost in Britain since Rachel Reeves’s autumn budget, official figures show, fuelling a rise in unemployment to the highest level in almost four years.
In a blow for the chancellor before Wednesday’s spending review, the Office for National Statistics (ONS) said the jobless rate increased to 4.6% in the three months to the end of April, up from 4.5% on the previous three-month period, to hit the highest level since summer 2021. In a blow for the chancellor on the eve of Wednesday’s highly awaited spending review, the figures from HMRC show the number of workers on company payrolls fell by 109,000 in May – the largest monthly fall since the same period in 2020 during the first Covid lockdown.
Business leaders blamed the hit to jobs on Reeves’s tax-raising October budget, including a £25bn rise in employer national insurance contributions (NICs) affecting more than 1m companies, which came into effect from April.
Combined with challenges for employers including high borrowing costs and heightened uncertainty amid Donald Trump’s trade wars, the figures took the total number of jobs lost since the October budget to 276,000.
“These shocking figures should make it abundantly clear to the government that the changes to employer NICs are inflicting more harm than good, and they should be reviewed and reversed urgently,” said Kate Nicholls, the chief executive of the lobby group UK Hospitality.
“We were clear at the time that the changes to NICs were a tax on jobs, and so it is sadly proving.”
Separate figures from the Office for National Statistics showed Britain’s official unemployment rate rose to 4.6% in the three months to April, up from 4.5% in the previous three-month period, to reach the highest level since July 2021.
Annual growth in regular wages slowed to 5.2% from a revised 5.5%, below City economists’ forecasts for a reading of 5.3%.Annual growth in regular wages slowed to 5.2% from a revised 5.5%, below City economists’ forecasts for a reading of 5.3%.
Liz McKeown, the ONS director of economic statistics, said: “There continues to be weakening in the labour market, with the number of people on payroll falling notably. Feedback from our vacancies survey suggests some firms may be holding back from recruiting new workers or replacing people when they move on. The ONS’s figures are based on its widely criticised labour force survey, which has suffered from collapsing response rates. Experts have argued this leaves policymakers “flying blind”, creating the prospect that decisions are being taken based on flawed data.
“Earnings growth has slowed in both cash and real terms, though it remains strong by historic standards. Public sector pay is now growing at a higher rate than wages in the private sector.” However, economists said there was clear evidence of a slowdown in the labour market, including a 63,000 fall in the number of job vacancies posted by employers in the three months to the end of May.
Unemployment is measured using the ONS’s widely criticised labour force survey, which has suffered from collapsing response rates. Experts have argued this leaves policymakers “flying blind”, with the prospect that decisions are being taken based on flawed data.
However, separate figures showed the number of workers on UK company payrolls collapsed at the fastest rate since the height of the Covid pandemic, with a monthly drop of 109,000 in May. Vacancies also fell by 63,000 over the three months to the end of May.
The latest snapshot gives the first indication of the impact of Reeves’s £25bn rise in employer national insurance contributions (NICs) introduced from April, affecting almost 1m businesses, as well as a 6.7% rise in the national living wage.
Highlighting the pressure on the chancellor before her highly anticipated spending review, the figures showed the number of employees on payroll has fallen by 276,000 since Reeves’s October budget.
Suren Thiru, the economics director at the Institute of Chartered Accountants in England and Wales, said: “These figures suggest that the UK’s jobs market took a damaging hit from ‘Awful April’, with the tough reality of sharply rising NICs and national living wage costs pushing more employers to cut staff.Suren Thiru, the economics director at the Institute of Chartered Accountants in England and Wales, said: “These figures suggest that the UK’s jobs market took a damaging hit from ‘Awful April’, with the tough reality of sharply rising NICs and national living wage costs pushing more employers to cut staff.
“The UK’s labour market is in a painful period with eye-wateringly high business costs likely to mean more job losses this year, particularly if the spending review increases the odds of more tax hikes in the autumn budget.”“The UK’s labour market is in a painful period with eye-wateringly high business costs likely to mean more job losses this year, particularly if the spending review increases the odds of more tax hikes in the autumn budget.”
Businesses in typically lower-paying sectors, including hospitality, leisure and retail, had warned jobs could be hit. Andrew Griffith, the shadow business secretary, said the increase in unemployment was “disappointing but no surprise”.Businesses in typically lower-paying sectors, including hospitality, leisure and retail, had warned jobs could be hit. Andrew Griffith, the shadow business secretary, said the increase in unemployment was “disappointing but no surprise”.
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It comes as the Bank of England monitors the jobs market for signs of weaker conditions as policymakers consider whether to cut interest rates further after four earlier reductions in borrowing costs to 4.25%.It comes as the Bank of England monitors the jobs market for signs of weaker conditions as policymakers consider whether to cut interest rates further after four earlier reductions in borrowing costs to 4.25%.
Threadneedle Street is widely expected to keep rates on hold next week amid heightened uncertainty over the impact of Donald Trump’s increasingly erratic trade wars on the world economy.Threadneedle Street is widely expected to keep rates on hold next week amid heightened uncertainty over the impact of Donald Trump’s increasingly erratic trade wars on the world economy.
Economists said the sharper-than-expected slowdown in wage growth could encourage the Bank to cut borrowing costs by a further quarter of a percentage point at the following meeting in August. The pound fell by about 0.5% against the US dollar after the data.Economists said the sharper-than-expected slowdown in wage growth could encourage the Bank to cut borrowing costs by a further quarter of a percentage point at the following meeting in August. The pound fell by about 0.5% against the US dollar after the data.
James Smith, a developed markets economist at ING, said: “The UK jobs market might be turning a corner – and not in a good way.James Smith, a developed markets economist at ING, said: “The UK jobs market might be turning a corner – and not in a good way.
“If nothing else, this should help cement another rate cut in August and further quarterly cuts in November and into 2026. We wouldn’t totally rule out the Bank moving faster, particularly because we are more upbeat about the inflation outlook.”“If nothing else, this should help cement another rate cut in August and further quarterly cuts in November and into 2026. We wouldn’t totally rule out the Bank moving faster, particularly because we are more upbeat about the inflation outlook.”
Despite the rise in unemployment, separate figures showed the rate of economic inactivity – when working-age adults are neither in a job or looking for one – fell by 0.2 percentage points to 21.3%.Despite the rise in unemployment, separate figures showed the rate of economic inactivity – when working-age adults are neither in a job or looking for one – fell by 0.2 percentage points to 21.3%.
Alison McGovern, the employment minister, said the government was putting in place more help for jobseekers. “Supporting more people into work and putting more money in the pockets of working people is at the heart of our plan for change,” she said.Alison McGovern, the employment minister, said the government was putting in place more help for jobseekers. “Supporting more people into work and putting more money in the pockets of working people is at the heart of our plan for change,” she said.