The UK unemployment rate rose to 4.5% in the first quarter of 2025, marking its highest level since August 2021, according to data released Tuesday by the Office for National Statistics (ONS). This is a slight increase from 4.4% in the previous three-month period ending in February.
The rise comes ahead of April’s business tax hike introduced by the Labour government in its first budget, and a 10% US tariff imposed by President Donald Trump on UK and other foreign goods last month.
ONS director Liz McKeown noted that the labour market continues to cool, with fewer employees on payroll and wage growth slowing slightly, although pay levels remain relatively strong across both public and private sectors.
Analysts believe the data increases the likelihood of two more Bank of England interest rate cuts in 2025, following two reductions earlier this year. Capital Economics’ Ruth Gregory pointed out that while job losses are rising, strong pay growth may delay a more aggressive monetary response. She added that recent business decisions to cut staff may reflect cost pressures from rising taxes and the new minimum wage.
