The UK unemployment rate rises to 5.2%, its highest level in more than a decade outside the pandemic. At the same time, wage growth has slowed again, strengthening expectations of a Bank of England interest rate cut next month.
According to the Office for National Statistics (ONS), the jobless rate rose to 5.2% in the three months to the end of 2025. That compares with 5.1% in the previous three-month period. Excluding the pandemic spike, this is the highest rate since 2015.
Although the ONS continues to overhaul its labour force survey, analysts say recent improvements have strengthened data reliability. As a result, markets reacted quickly to the latest figures.
Sterling initially fell against the US dollar before partially recovering its losses. Meanwhile, investors increased their bets on a March rate cut by the Bank of England. Economists noted that cooling labour market pressures could give policymakers more confidence to ease borrowing costs.
UK unemployment rate hits five-year high of 5.2% https://t.co/ps0qldf9YJ
— BBC News (UK) (@BBCNews) February 17, 2026UK unemployment rate hits 5.2% as wage growth cools
Alongside the rise in unemployment, wage growth also slowed. Annual pay growth excluding bonuses eased to 4.2% in the final quarter of 2025, down from 4.4% previously. Private sector wage growth, closely watched by the Bank of England, also moderated.
This slowdown offers some reassurance to policymakers who want to ensure inflationary pressures are easing. Non-bonus pay in the private sector grew more slowly than in earlier months.
Employers, however, point to rising payroll costs as a major concern. Recent tax increases on businesses and changes to minimum wage rules have raised operating expenses. Consequently, some companies are scaling back hiring plans.
Read: Canada’s Unemployment Rate Hits 7.1%, a Nine-Year High
A recent employer survey found that many firms plan to reduce permanent hiring due to higher costs. Analysts also highlighted a rise in youth unemployment, which may reflect caution among businesses when hiring junior staff.
Despite these challenges, there are signs of potential stabilisation. December’s payroll employment drop was smaller than initially estimated. A provisional January figure showed a modest decline, suggesting the pace of job losses may be slowing.
In addition, the ONS reported that job vacancies remained broadly stable. Therefore, while conditions have weakened, the labour market may not be deteriorating sharply.
