In the quarter to December 2025, unemployment and redundancy levels both rose, the employment rate fell slightly, and strong private sector wage growth has continued to slow. Provisional estimates suggest that vacancies are struggling to grow, and inactivity levels decreased slightly, but remain stubbornly high. As such, the UK labour market picture is broadly unchanged from recent months, but there is a growing challenge of people wanting to work, being unable to find it.
The UK employment rate (for people aged 16 to 64 years old) was estimated at 75.0% in the period between October 2025 and December 2025, which is slightly down on the quarter, but unchanged on the year. The UK unemployment rate (for people aged 16 and over) was estimated at 5.2% in the quarter to December 2025, representing an increase on the quarter and the year. The last time the unemployment rate was 5.2% was in the quarter to January 2021.
The inactivity rate for people aged 16 to 64 years old was estimated at 20.8% in the three months to December 2025, which is slightly down on the quarter and, to a greater extent, the year. The provisional estimate for the number of vacancies in the UK economy in the three months to January 2026 is 726,000, which is broadly unchanged on the quarter (+2,000) but down on the year (-73,000).
Estimates for payrolled employees in the UK fell by 121,000 (-0.4%) between December 2024 and December 2025, and decreased by 6,000 (0.0%) between November 2025 and December 2025. The early estimate of payrolled employees for January 2026 decreased by 134,000 (-0.4%) on the year, and by 11,000 (0.0%) on the month, to 30.3 million. The January 2026 estimate should be treated as provisional and is likely to be revised when more data is received next month.
Annual growth in employees' average regular earnings (excluding bonuses) in Great Britain was 4.2% in the three months to December 2025, and annual growth in total earnings (including bonuses) was also 4.2%. Annual growth in real terms (adjusted for inflation using the Consumer Prices Index including owner occupiers' housing costs (CPIH)), for regular pay and total pay stood at 0.5%, respectively, across the same period.
This data release highlights that recent labour market challenges continued into the month after the Autumn Budget. Anecdotal business feedback has pointed to rising costs as an ongoing barrier that is stopping firms from making the investments key to driving sustainable, productivity-led growth. Without action to tackle this, these challenges will intensify in the months ahead.
It remains critical that government works with businesses to ensure the UK labour market is a strength, rather than strain, in the drive for growth. This means engaging employers to identify the potential unintended consequences associated with different policies. For example, preventing firms from being able to invest in workforce training by treating the Growth and Skills Levy as a tax to fund national skills initiatives.
