Unemployment Hits Four-Year High at 5.1%
Youth joblessness surges as hospitality sector braces for challenging winter period
Britain’s unemployment rate has climbed to 5.1% for the three-month period ending in October, marking the highest level since early 2021 and raising concerns across the hospitality and licensed trade sectors that rely heavily on younger workers.
The figures from the Office for National Statistics reveal a significant deterioration from the 4.3% rate recorded twelve months earlier, with young adults aged 18-24 bearing the brunt of the downturn. This age group saw 85,000 additional people out of work during the period—the sharpest increase in nearly three years.
For hospitality businesses, the data paints a worrying picture ahead of what should be the industry’s busiest trading period. The sector traditionally depends on young workers to fill service roles, particularly during the crucial festive season.
Pre-Budget Uncertainty Takes Its Toll
The statistics, which predate October’s Budget announcement, appear to reflect widespread employer hesitancy during the autumn months. Many businesses across sectors adopted a wait-and-see approach to recruitment as they anticipated the Chancellor’s fiscal plans.
Industry representatives have indicated that ongoing concerns about national insurance contribution increases continue to weigh on hiring decisions. Last year’s Budget raised employer NI costs, making recruitment more expensive for labour-intensive sectors like hospitality.
Company payroll data shows employment fell by 149,000 positions—a 0.5% decline—when comparing October to the same month in 2024.
ONS economic statistics director Liz McKeown described the situation as indicative of weakening labour market conditions, with young people disproportionately affected by reduced payroll numbers and rising unemployment.
The number of people working in UK hospitality has fallen by more than 100,000 in the past year as the sector bears the brunt of increases to employers’ National Insurance Contributions (NICs).
UKHospitality said there had been a major fall in the availability of entry-level roles typically taken up by young people.
Wage Growth Diverges Between Sectors
For those remaining in employment, average earnings growth excluding bonuses stood at 4.6% during the August-to-October period, continuing to outpace inflation. However, this headline figure masks a growing divide between public and private sector pay trends.
Private sector wage growth has decelerated from 4.2% to 3.9%, while public sector employees have seen pay increases accelerate from 6.6% to 7.6% compared to the previous three-month period. The divergence reflects the timing of government-sector pay settlements implemented earlier this year.
Interest Rate Decision Looms
With the Bank of England’s Monetary Policy Committee set to announce its interest rate decision this week, economists are closely watching whether policymakers will reduce rates from the current 4% level.
KPMG UK’s chief economist Yael Selfin suggested the labour market data strengthens the case for a rate cut. However, the Bank faces a delicate balancing act—inflation currently runs at roughly double its 2% target, and lowering borrowing costs risks reigniting price pressures.
Quilter Cheviot’s Richard Carter, head of fixed interest research, characterised the Bank’s position as treading a narrow path between stimulating economic growth and maintaining downward momentum on inflation.
Wednesday’s inflation data release will likely prove crucial in determining the committee’s decision, with market observers suggesting a rate reduction could materialise if price growth comes in lower than anticipated.
Work and Pensions Secretary Pat McFadden acknowledged the challenging employment landscape, pointing to a £1.5 billion government investment programme designed to create 50,000 apprenticeships and 350,000 workplace opportunities for young people.
Opposition work and pensions spokesperson Helen Whately criticised what she termed detrimental government policies, arguing that fourteen consecutive months of rising unemployment means numerous families face financial hardship through the Christmas period and into the new year.
The government has committed to launching an inquiry into youth unemployment and economic inactivity, though details of the investigation’s scope and timeline remain to be confirmed.