UK unemployment rate jumps to multi-year high, wage growth slows, adding to bets for BoE rate cut

Great Britain’s labor data released on Tuesday, showed weaker than expected values and disappointed markets, but boosted investor bets on interest rate cut next month.

UK unemployment rate rose to 5.2% in the last three months of 2025, from 5.1% previous month, hitting its highest in over a decade, excluding pandemic period where jobless rate rose to 5.3%.

The same report showed a slowdown in wage growth which eased to 4.2% in three months to December, marking a sharp decline from 4.6% previous month and undershooting 4.6% forecast.

Jobless claims surged in January to 28.6K from 2.7K previous month and above 22.8K consensus.

UK employers mainly blame policy changes by Prime Minister Keir Starmer’s government including last year’s tax hike for employers for downbeat labor data, which also strongly boosted economists’ expectations for BOE rate cut in March policy meeting.

Also, significant weakening in wage growth signals cooling of inflationary pressure from labor market that contributes to signals of policy easing.