UK jobs market cools as unemployment rate rises

Mitchell Labiak

Business reporter, BBC News

Getty Images A woman with long black hair in two plaits wearing a black beanie hat, khaki hoodie and navy quilted bodywarmer working as a mechanic with her oil covered hands inside the engine of a car with its bonnet up

The UK jobs market has weakened as wage growth slows and the unemployment rate rises, official statistics show.

The annual rate of pay growth in the three months between March and May slowed to 5%, the Office for National Statistics (ONS) said.

Meanwhile, the unemployment rate rose to 4.7%, its highest in four years, though the ONS has said the figure needs to be treated with caution due to problems with how the data is collected.

Economists say a weaker labour market makes it more likely the Bank of England will cut interest rates in an attempt to boost the economy at its meeting next month.

A line chart showing the estimated number of vacancies in the UK. In January to March 2015, there were an estimated 730,000 vacancies. That rose gradually to 864,000 in late-2018, before dropping steeply to 328,000 in the wake of the Covid pandemic in early-2020. It then hit a high of 1.3 million in mid-2022, before gradually falling to 727,000 in April to June 2025, the lowest level for a decade outside the pandemic period.

It added that survey data suggested that some firms may not be recruiting new workers or replacing ones who have left.

The number of job vacancies is now at its lowest in 10 years, excluding the plunge seen during the pandemic when lockdowns stopped firms from hiring.

Yael Selfin, chief economist at KPMG UK, said the “slowing pay growth opens the door for an interest rate cut in August”.

“The impact of April’s tax and administrative changes has led to a marked slowdown in hiring activity among firms,” she added.

“With domestic activity remaining sluggish, the MPC will likely want to provide support via looser policy to prevent a more significant deterioration in the labour market.”

‘We’re managing by the skin of our teeth’

Peter Kinsella says he is more cautious about hiring staff for his restaurant

Andrew Teebay Peter Kinsella stood in a Spanish restaurant he owns in Liverpool — Peter Kinsella says he is more cautious about hiring staff for his restaurant

Peter Kinsella runs two Spanish restaurants in Liverpool City centre and says this is the toughest period for the business since the financial crisis in 2008.

He says the increase in employer national insurance contributions has “really impacted our recruitment. We employ fewer people than we did in March.”

Peter has cut staffing hours, decreased opening times, and invests less in repairs in the restaurant to make money go further.

“We’re managing, but by the skin of our teeth”, he says.

He’s also being more cautious about hiring new staff, often reluctantly not replacing people who leave the business.

“It’s a fantastic thing to take people on, to give them work. So we want to avoid at all costs those things that have a real impact on people’s lives, but we’ve had no choice”.