UK Unemployment Hits Near Five-Year High As Wage Growth Stalls

The latest ONS figures, covering the three months to the end of December, show the jobless rate nudging upward from 5.1% in the previous rolling quarter, with some 52,000 new workers added during the period — down sharply from 82,000 in the quarter to November.

The reading came in fractionally above consensus forecasts, which had pointed to a steady hold at 5.1%.

For operators across the licensed hospitality and on-trade sector, the figures represent more than an economic headline. With the industry already grappling with elevated running costs, the prospect of weakening consumer spending power strikes at the heart of footfall and discretionary spend.

Alongside the rise in unemployment, the Bank of England’s preferred gauge of wage pressure — regular private sector pay growth — fell to 3.4%, its lowest level in more than five years.

That figure matches December’s headline inflation reading of 3.4%, meaning that in real terms, private sector workers saw virtually no improvement in their purchasing power over the period.

Economists warn that the effective stagnation of real wages, combined with household concerns about growing debt levels and shrinking savings, is contributing to a deterioration in consumer confidence — a trend with direct implications for discretionary spending on eating and drinking out.

Among the most striking elements of the latest release is the sharp deterioration in youth employment. The unemployment rate for 18- to 24-year-olds has risen to 14% — representing roughly one in seven young people out of work — with the number of 18-24 year olds without jobs jumping by 80,000 in a single quarter to reach 575,000.

Reacting to the figures, ONS Director of Economic Statistics Liz McKeown said: “The number of workers on payroll fell further in the final quarter of the year, reflecting weak hiring activity, although it is largely unchanged in the latest month.

“Over the same period the unemployment rate increased, with data showing that more people who were out of work are now actively looking for a job.

“The number of vacancies has remained broadly stable since the middle of last year. Alongside rising unemployment this means that the number of unemployed people per vacancy has increased, reaching a new post-pandemic high.

“Meanwhile, redundancies are also showing an upward trend.

“Private sector wage growth continues to slow and is at its lowest rate in five years.

“Public sector pay growth also slowed in the latest period but remains elevated, still affected by some pay awards being implemented earlier in 2025 than 2024, although this effect has now started to diminish.”

 Allen Simpson, CEO of UKHospitality, said: “Today’s labour market figures underline the growing strain on the UK jobs market, with unemployment rising to 5.2%, its highest level since early 2021, and payroll employment continuing to fall.

“Sadly, younger workers and entrylevel roles are bearing the brunt of this slowdown, with employment among under35s down sharply since mid2024. Hospitality is a vital entry point into work for young people, but rising costs and policy decisions – including changes to employer National Insurance, costing the sector £3.4bn a year – are making it harder for businesses to create, sustain and recruit into these roles. Without urgent action to ease the pressure on employers, we risk locking a generation out of vital opportunities to gain skills, experience and a foothold in the workforce.

“If the Government is serious about growth and tackling youth unemployment, it must urgently ease the pressure on hospitality businesses and stop taxing jobs out of the economy.”