The United Kingdom’s (UK) unemployment rate has climbed to its highest point since August 2021, according to official figures released on Tuesday.
The development comes as UK businesses grapple with a recent tax increase and newly imposed US tariffs.
Data from the Office for National Statistics (ONS) shows that the unemployment rate rose to 4.5 percent in the first quarter of 2025, up from 4.4 percent in the previous three-month period ending in February.
The figures reflect conditions prior to the implementation of a business tax hike introduced in April as part of the Labour government’s first budget, presented in October last year.
The rise in unemployment also predates the 10-percent baseline tariff introduced last month by US President Donald Trump, affecting the UK and several other nations.
Commenting on the trend, Liz McKeown, ONS Director of Economic Statistics, stated, “The broader picture continues to be of the (UK) labour market cooling, with the number of employees on payroll falling in the first quarter of the year.”
Despite the slowdown in job creation, wages have remained relatively strong.
“Wage growth slowed slightly in the latest period but remains relatively strong, with public and private sectors… showing little difference,” McKeown added.
Economic analysts suggest the figures could prompt the Bank of England to continue reducing interest rates this year. The central bank has already made two rate cuts in 2025.
Ruth Gregory, Deputy Chief UK Economist at Capital Economics, observed, “While the jobs market weakened further, this isn’t feeding through to a marked easing in pay growth.”
She further noted, “That will probably keep the Bank of England cutting interest rates at the current pace of once every quarter.”
Gregory also pointed to signs of ongoing labour market strain in April, “Further softening in employment in April suggests businesses continued to respond to the rise in business taxes and the minimum wage by reducing headcount.”
