Credit: Jason Alden/Bloomberg
LONDON — The U.K. unemployment rate rose to 5.2% in the three months to December 2025, the highest level in nearly five years, according to new figures from the Office for National Statistics. The increase, up from 5.1% in the prior three-month period, comes as hiring cools and employers cite higher payroll costs, Feb. 17, 2026.
Youth unemployment climbs to decade high
The unemployment rate for people ages 16 to 24 rose to 16.1%, the highest level in more than 10 years, highlighting growing pressure on younger workers as employers slow hiring.
Lucy Gabb, a Cambridge graduate, told the BBC she has applied for more than 50 roles and received only one face-to-face interview.
“Entry-level jobs are just so competitive, and they’re asking for experience that is just impossible to get whilst you’re also studying,” Gabb said. “All my friends are talking about is the job search; it can be really soul-destroying when you study for so long, and you don’t get anywhere.”
Political reaction focuses on entry-level jobs
Work and Pensions Secretary Pat McFadden said the Labour government has “more to do to get people into jobs,” calling youth unemployment a priority and pointing to efforts to expand access to apprenticeships.
Opposition Conservatives said young people were bearing the brunt of the slowdown. Helen Whately blamed higher costs on employers, arguing that tax changes have made hiring “more expensive and more risky,” contributing to a drop in entry-level opportunities.
Liberal Democrat Deputy Leader Daisy Cooper called for an emergency VAT cut for the hospitality sector.
Businesses cite rising costs for hiring slowdown
Employers have pointed to higher operating and labor costs, including increased employer National Insurance contributions and a higher minimum wage, as reasons for being more cautious about recruitment. Several measures were introduced in Chancellor Rachel Reeves’ recent Budget.
Retail sheds jobs as health sector grows
The biggest employment losses were in retail and wholesale, which shed 65,000 jobs since January 2025, according to the ONS data.
The strongest gains were in health and social work, which added 39,000 jobs in the year to January.
Danni Hewson of AJ Bell said some workers may be shifting from retail into health care, while warning that investment in artificial intelligence could further reduce junior hiring, creating “a scarcity of entry-level posts.”
Wage growth cools as rate-cut talk grows
Average annual wage growth eased to 4.2% from 4.4%, while inflation stood at 3.4%, above the Bank of England’s 2% target. Wages are still rising faster than prices, but the pace is slowing.
Paul Dales of Capital Economics said the trend supports the case that the Bank of England may have room for “at least a couple more” interest rate cuts if wage growth continues to cool.
The ONS labor market series has faced criticism over reliability, including scrutiny from the Bank of England, adding uncertainty to how sharply unemployment is rising.