UK unemployment rate hits highest since 2021 at 5%: "Pure and simple consequence of Labour's tax on jobs”

UNEMPLOYMENT in the UK has hit 5% as experts say this is the “pure and simple consequence of Labour's tax on jobs”.

The unemployment rate for people aged 16 years and over was estimated at 5% in July to September 2025, Office for National Statistics (ONS) data out today revealed. 

This is up in the latest quarter and above estimates of a year ago. It is also the highest since 2021.

Estimates for payrolled employees in the UK fell by 117,000, or 0.4%, between September 2024 and September 2025 and decreased by 32,000, or 0.1%, between August 2025 and September 2025.

The early estimate of payrolled employees for October 2025 decreased by 180,000, or 0.6%, on the year, and by 32,000, or 0.1%, on the month, to 30.3 million. 

The estimated number of vacancies in the UK are broadly unchanged on the quarter. Early estimates suggest a small increase of just 2,000, or 0.2%, vacancies to 723,000 in August to October 2025.

It was April when measures introduced in Rachel Reeves's first Budget came into effect, with hikes in minimum pay and employer national insurance contributions.

"Taken together, these figures point to a weakening labour market," said Liz McKeown, director of economic statistics for the ONS.

Experts warned that the figures showed Labour's policies are not working.

David Morel, CEO at London-based Tiger Recruitment, said: "These figures are unsurprising and give an accurate picture of what is happening in the UK permanent jobs market right now. The rise in employers' National insurance, global companies finding it easier and cheaper to hire talent outside the UK, concerns about the impending employment rights bill, uncertainty caused by what will come out in the latest Budget and a lack of support for SMEs in the UK are too much for companies to bear right now. 

“The problem is that there is little light at the end of the tunnel and radical changes are needed to stop the rot.”

David Belle, Founder and Trader at Fink Money, agreed, adding: "You reap what you sow. That's what Labour are now seeing. When you increase the cost of hiring so much, firms will hire fewer people and lay off people. It's simple economics. But the Government doesn't seem to get this. 

“It is astonishing that Reeves and Starmer are still in a job. The amount of contempt the entire country has for them, because they are so utterly out of their depth, is at a critical level now. Yet they carry on destroying everything. They are an amazing duo of incompetence.”

Sam Kirk, Managing Director at Retford-based J-Flex Rubber Products, said he wasn't surprised by the data.
 

He continued: "The Government’s handling of the economy is about as effective as a chocolate fireguard. With unemployment now at 5% and over 180,000 payrolled jobs lost in a year, this isn’t just a bump in the road. 

“Meanwhile MPs boast about earnings growth while ignoring the collapse in job security, stagnant vacancies and the rising claimant count. The truth is, their policies are failing both workers and businesses, and the cost is being paid in livelihoods, lost potential and a shrinking workforce. This Government is out of touch, out of ideas and running out of time.”

Stephen Perkins, Managing Director at Norwich-based Yellow Brick Mortgages, said Labour raising employer national insurance contributions had led to these figures.

He added: “The number of people out of work continues to increase beyond predictions, at the same time as no new vacancies are being created. This is the pure and simple consequence of the tax on jobs from the last Budget and the overall failure of the economy under a government out of its depth.”
 

Samuel Mather-Holgate, Independent Financial Adviser at Swindon-based Mather and Murray Financial, slammed Reeves' policies.

He said: “Rachel Reeves doesn’t need an economics degree or to have worked for the Bank of England to realise if you make it more expensive to hire people you strangle employment rates. 

"Despite this, she seems intent on making things more difficult at the coming Budget. It’s time for Reeves to be added to the unemployment queue, and her P45 handed to her quickly. There is no sense this will be a business friendly Budget or agenda for growth and if the markets don't like it she’ll be off.”

Michelle Lawson, Director at Fareham-based Lawson Financial, agreed, adding: "This isn’t the news the Chancellor will be looking to see ahead of the Budget. Public sector wage rises higher than that in the private sector will have a push on inflation. 

"Employers and business are under the cosh with costs surging. The upcoming Budget will likely push this harder if the stories are true. UK plc is in crisis and we have the most unpopular Government potentially ever at the helm. What could possibly go wrong?"

Emma Jones, Managing Director at Runcorn-based Whenthebanksaysno.co.uk, said the outlook was “bleak”.

She continued: “5% unemployment is what you get in a fiscal climate like this. With its tax hikes, the Government is making it extremely difficult for firms to not just hire but keep on their existing staff. One word: bleak. And things may be even bleaker by the end of the month following the Budget.”

Scott Gallacher, Director at Leicester-based Rowley Turton, advised people to be careful with their money in the coming months.

He added: "The unemployment rise reflects a cooling jobs market that’s beginning to show the effects of higher interest rates, higher Employer’s National Insurance, and broader economic uncertainty. While wage growth remains relatively strong, the combination of falling payroll numbers and stubborn inflation could place increasing pressure on household Budgets. 

“This employment data is a timely reminder to be prudent, as the risks of losing your job are rising whilst the chances of walking into another are falling. As most people are just one payday away from financial difficulty, and with Christmas fast approaching, I’d urge people to be cautious with their spending and avoid getting into unnecessary debt."

Tony Redondo, Founder at Newquay-based Cosmos Currency Exchange, said: "The tax on jobs announced by the Chancellor in last year’s Budget has had its inevitable result, with the UK unemployment rate hitting its highest level since May 2021 in the aftermath of the Covid-19 lockdowns. 

"This is concerning data showing a clear softening in the UK labour market. Of particular concern is the simultaneous rise in unemployment to 5.0% and fall in payrolled employees by 117,000 over the year, while vacancies remain stubbornly flat.

"This suggests employers are contracting headcount but not yet confident enough to hire aggressively. The bad news does not stop there. The public-private sector wage divergence indicates the private sector is bearing the brunt of cost pressures. Roll on to this year’s budget tax rises in just over two weeks."