UK Unemployment Rises to Highest Level in Four Years as Job Losses Mount

The United Kingdom’s unemployment rate has climbed to 4.6% in the three months to April, marking the highest level since July 2021. Official figures from HM Revenue and Customs (HMRC) reveal that over 276,000 jobs have been lost since Chancellor Rachel Reeves’s autumn budget, which imposed a £25 billion hike in employer national insurance contributions (NICs). Business leaders and analysts have pointed to these increased costs as a significant factor behind the decline in jobs.

During May alone, the number of workers on company payrolls dropped by 109,000, representing the largest single-month fall since early 2020 during the initial Covid-19 lockdown. The rise in employer NICs, which came into effect in April, has hit more than 1 million companies, leading to widespread job cuts and warnings from industry representatives, particularly in the hospitality, leisure, and retail sectors.

Kate Nicholls, chief executive of UKHospitality, stated, “These shocking figures should make it abundantly clear to the government that the changes to employer NICs are inflicting more harm than good, and they should be reviewed and reversed urgently.” She emphasised that the changes amount to a “tax on jobs,” a sentiment echoed by many within the business community.

While unemployment rises, the broader labour market shows further signs of cooling, with the number of job vacancies falling by 63,000 in the three months to the end of May. Wage growth has also slowed, with annual growth in regular wages dropping to 5.2%, down from a revised 5.5% in the prior period. Economists suggest this softer-than-expected wage growth could influence the Bank of England’s monetary policy decisions in the coming months.

Suren Thiru, economics director at the Institute of Chartered Accountants in England and Wales, outlined the effects of rising costs on the job market, stating that businesses face “eye-wateringly high” expenses, prompting many to reduce their workforce. He warned of further job losses in 2025 should fiscal policies, such as future tax increases, exacerbate financial pressures on employers.

The economic picture has darkened further due to global concerns, including Donald Trump’s ongoing trade wars. These international uncertainties have added to business hesitations, as firms grapple with high borrowing costs and a less favourable operating environment. The Bank of England is closely monitoring these developments, with speculation mounting over potential interest rate cuts in the coming months as policymakers aim to stabilise the economy.

Despite the rise in unemployment, the rate of economic inactivity among working-age adults fell slightly by 0.2 percentage points to 21.3%. Employment Minister Alison McGovern pointed to government initiatives aimed at supporting job seekers, reiterating the importance of putting more people into work during these challenging times.

The job losses and economic challenges underscore the difficult balancing act the government faces in addressing fiscal pressures without deepening strains on businesses. Analysts will closely watch forthcoming spending reviews and decisions on employer costs to assess their impact on labour market stability.