Britain’s unemployment rate climbed to 5 percent in the third quarter of 2025, the highest level since early 2021, according to data released on Tuesday by the Office for National Statistics (ONS). The figure exceeded analysts’ expectations of 4.9 percent and marked a sharp increase from 4.7 percent recorded in the previous quarter.
The report comes ahead of the Labour government’s annual budget, scheduled for November 26, which is expected to introduce tax increases amid sluggish economic growth.
“The number of people on payroll is falling, with revised tax data now showing declines in most of the last 12 months,” said Liz McKeown, ONS Director of Economic Statistics.
The figures present a new challenge for Prime Minister Keir Starmer’s government, whose popularity has waned just 16 months after winning the general election.
“There will be no pre-budget comforts that can be taken from today’s employment data,” said Isaac Stell, an analyst at Wealth Club. “Not only has the unemployment rate risen, but wage growth continues to shrink.”
Stell added that uncertainty surrounding the upcoming budget has caused businesses to delay hiring and investment decisions until the government’s fiscal direction becomes clearer.
Despite the negative outlook, analysts noted that the weaker labour data could strengthen the case for a Bank of England interest rate cut at its next monetary policy meeting in December, potentially easing financial pressures.
Finance Minister Rachel Reeves has already signaled plans to raise taxes in the forthcoming budget to reduce government debt and fund essential public services.
