Unemployment rate in Britain ticked higher toward the end of last year, reaching its highest level in more than ten years outside of the pandemic period, while wage growth continued to ease, according to data on Tuesday that adds to bets on a U.K. interest rate cut next month.
The jobless rate rose to 5.2% in the last three months of 2025, the highest since 2015 not including the pandemic, according to the data from the Office for National Statistics (ONS). It hit 5.3% in late 2020 and stood at 5.1% in the three months to November last year.
The unemployment rate is calculated from a survey that the ONS is in the process of overhauling after response rates dipped too low during the pandemic. However, analysts say the quality of the data has improved in recent months.
Sterling fell by more than half a cent against the dollar after the figures were published.
"Today's data raises the prospect of the Bank of England (BoE) resuming cutting interest rates in March," Yael Selfin, chief economist at KPMG UK, said.
Investors priced a roughly 73% chance of a quarter-point rate cut on March 19 at the BoE's next meeting, up from 65% on Monday.
The data from the ONS showed weaker inflationary heat from growth in workers' earnings.
Annual wage growth, excluding bonuses, slowed to 4.2% in the last three months of 2025 compared with the same period a year earlier, matching forecasts by most economists in a Reuters poll and down from 4.4% in the three months to November.
The BoE is watching pay as a gauge of how long Britain's above-target inflation is likely to last.
Earlier this month, the central bank said previously strong wage growth in the private sector was starting to reflect the weakening of the jobs market.
Private sector annual wage growth excluding bonuses slowed to 3.4% in the three months to December, down from 3.6% in the three months to November.
Last week ONS data showed weaker-than-expected growth in the overall economy in the October-to-December period, hurt in part by speculation about tax increases in Treasury chief Rachel Reeves' budget at the end of November.
There were some signs in the most recent figures included in Tuesday's data release that the labor market might be stabilizing after taking a hit on Reeves' increase last April in a tax paid by employers.
The number of people in payrolled employment fell by 11,000 people in January from December.
In December, payrolls fell by a revised 6,000, the smallest drop since August last year and a much softer fall than a provisional estimate of a plunge of 43,000.
