UK Unemployment Rises to 5% as Jobs Market Weakens — Highest Since Early 2021

November 11, 2026 Faizan Altaf

Unemployment in the United Kingdom has risen to 5%, its highest level in almost five years, according to new official figures published on Tuesday, 11 November 2026. The rise was bigger than economists had expected, and it adds to growing signs that Britain’s jobs market is cooling down.

The Office for National Statistics (ONS) said the unemployment rate reached 5% in the three months to September 2026, up from 4.8% in the previous quarter. It is the highest rate since the period from December 2020 to February 2021, when the country was still under Covid-19 restrictions. If you set aside the distorted figures from the pandemic years, it is the highest since August 2016.

The figures land just two weeks before the government’s Budget on 26 November, and they are likely to shape the debate about taxes, spending and the cost of living. They also raise the chances that the Bank of England will cut interest rates when its Monetary Policy Committee meets on 18 December.

What the new figures show

The headline number is the unemployment rate: the share of people aged 16 and over who are out of work but available for and actively looking for a job. Here is what the ONS reported:

Unemployment rose to 5.0% in the three months to September 2026, up from 4.8% in the previous quarter.
About 1.8 million people were unemployed, according to the official figures.
Economists had expected a smaller rise, to 4.9%. The actual figure came in above that forecast.
The rate was last higher in January 2021, during the height of the Covid pandemic.

Liz McKeown, the ONS director of economic statistics, said the figures point to a weakening jobs market. “Taken together, these figures point to a weakening labour market,” she said. “Meanwhile the unemployment rate is up in the latest quarter to a post pandemic high.”

The ONS also sounded a note of caution about its own numbers. The figures are based on the Labour Force Survey, which has suffered from falling response rates in recent years, and the ONS said the data should be treated with care while it works to improve its quality.

Fewer people on company payrolls

The survey figures were backed up by a second set of data, drawn from tax records, which tells a similar story. The number of people on company payrolls fell by 180,000 in the year to October — a drop of 0.6%. Payrolls also fell by 32,000 in a single month compared with September.

That payroll data is important because it does not rely on the survey. It counts the actual number of employees registered through the tax system, and it shows that employers have been steadily cutting staff numbers over the past year.

At the same time, the number of job vacancies has stopped growing. There were 723,000 vacancies between August and October, up by just 2,000 on the previous quarter. That is the first increase in vacancies in more than three years, but the total is still far below the peak of 1.3 million recorded between March and May 2022, when employers were struggling to fill roles after the pandemic.

Nearly 1.7 million people are claiming unemployment-related benefits, a slight decrease on a year ago. The claimant count and the unemployment rate measure different things — the claimant count includes people on benefits who must look for work — but both point to a jobs market that has lost momentum.

Pay growth is slowing too

For people in work, the figures contain a mixed message. Average pay across the economy grew by 4.6% in the third quarter of 2026, slightly down from 4.7% in the previous three months. That is still above inflation, which means pay is rising in real terms for most workers, but the pace of growth is easing.

The gap between the public and private sectors remains wide. Pay in the public sector grew by 6.6%, compared with 4.2% in the private sector. Public-sector pay rises have been boosted by recent pay settlements for teachers, nurses and other public workers, while private-sector employers have been more cautious.

Slower pay growth matters for two reasons. For workers, it means smaller pay rises at a time when household budgets are still under pressure. For the Bank of England, it is a sign that inflationary pressure in the jobs market is easing, which makes it easier to cut interest rates.

Why employers are holding back

Business groups say the slowdown is no surprise. The British Chambers of Commerce said the strong rise in unemployment was a worrying sign, with vacancies virtually flat on the quarter. In its latest survey, nearly three quarters of businesses — 72% — said labour costs were their biggest cost pressure.

One reason is the rise in employer National Insurance contributions, which has made it more expensive for firms to hire staff. The Coventry and Warwickshire Chamber of Commerce said the latest figures show that the increase in employer National Insurance “has started to bite” and called on the government not to add further costs for businesses in the Budget.

Uncertainty is also playing a part. With the Budget only two weeks away, and months of speculation about which taxes may rise, many firms have put hiring plans on hold until they know what the Chancellor will announce. Richard Carter, of the investment firm Quilter Cheviot, noted that businesses have been shelving hiring plans with the Budget so close.

This is not a sudden collapse in the jobs market. It is a slow squeeze: fewer new jobs, fewer people being hired, and existing staff working under tighter budgets. The number of vacancies has been falling from its 2022 peak for years, and the rise in unemployment has been gradual. But the latest figures show the squeeze is now biting harder.

What it means for interest rates

The figures are likely to strengthen the case for an interest rate cut. The Bank of England has already warned that unemployment could push further above 5% next year, and it expects the rate to stay close to 5% in the coming years. A weaker jobs market makes it harder for workers to demand bigger pay rises, and harder for businesses to raise their prices — both of which help to bring inflation down.

After the figures were published, expectations grew that the Bank of England’s Monetary Policy Committee will cut rates when it meets on 18 December. A cut would lower borrowing costs for households with mortgages and for businesses taking out loans, though it would also mean lower returns for savers.

Interest rates are not the only tool available. The government will set out its own plans in the Budget on 26 November, and the Chancellor, Rachel Reeves, will be under pressure to show how she plans to support jobs and growth without adding to the cost burden on employers.

What happens next

Three dates matter over the next few weeks:

26 November 2026 — the Budget. The Chancellor will set out tax and spending plans, and businesses will be watching closely for any change to employer costs.
18 December 2026 — the Bank of England’s Monetary Policy Committee meets, with a rate cut now looking more likely.
Early 2027 — the next rounds of jobs data will show whether unemployment keeps rising above 5%, as the Bank of England has warned it might.

For jobseekers, the message is that competition for roles is tougher than it has been for years. Vacancies are well below their 2022 peak, and employers are taking longer to hire. For workers in jobs, the slowdown in pay growth means household budgets are likely to stay tight even as inflation eases.

The ONS will publish its next labour market update in December, and that will show whether the rise to 5% was the start of a longer climb or a one-off jump. Either way, the jobs market is now firmly on the agenda for both the government and the Bank of England.

Frequently asked questions

What is the UK unemployment rate now?

The UK unemployment rate is 5%, according to the ONS figures for the three months to September 2026. It is the highest since early 2021.

How many people are unemployed in the UK?

Around 1.8 million people were unemployed in the three months to September 2026, according to the ONS.

Why has unemployment risen?

Employers have been cutting back on hiring as costs rise, including higher employer National Insurance contributions, and many firms have delayed recruitment ahead of the Budget on 26 November. Payrolls fell by 180,000 over the year to October.

Will the Bank of England cut interest rates?

The rise in unemployment has increased expectations of a rate cut when the Bank of England’s Monetary Policy Committee meets on 18 December 2026. The Bank has warned unemployment could rise further above 5% next year.

When is the next Budget?

The Budget is on 26 November 2026. Businesses are hoping the Chancellor will not add further costs for employers.

Conclusion

UK unemployment has reached 5% for the first time since the pandemic, and the wider jobs data tells the same story: payrolls are shrinking, vacancies are far below their peak, and pay growth is slowing. The figures were worse than economists expected, and they arrive at a difficult moment, with the Budget two weeks away and the Bank of England weighing an interest rate cut.

For now, the jobs market is weakening rather than collapsing. But with the Bank of England warning that unemployment could push higher next year, the next few months will show whether this is a turning point — or just the start of a longer slowdown.

Sources

This article is for general information and education only. It is not legal or financial advice.

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