The number of employed people in the UK has fallen, particularly in shops, restaurants, bars and hotels, reflecting weak hiring, while private sector wages grew at the slowest rate in five years, official figures show.
Figures from the Office for National Statistics (ONS) showed the number of employees on payrolls fell by 43,000 in December from the previous month, to 30.2 million – the biggest monthly drop since November 2020.
The rate of unemployment remained at a four-year high of 5.1% in the three months to the end of November, but this was up from 4.4% a year earlier. November’s single-month rate jumped to 5.4% from 5.1% in October, the joint highest in more than five years.
The chancellor, Rachel Reeves, has been criticised for creating uncertainty for employers in the run-up to her budget in late November, announcing £26bn of tax-raising measures in an effort to cut the cost of living and plugging a shortfall in the public finances.
Retail and hospitality companies have been among the most vocal in criticising the budget measures, including changes to business rates, with pubs among the hardest hit. The chancellor is thought to be finalising a support package that would include reductions to business rates for pubs, which otherwise face a 76% rise on average over the next three years.
Responding to the latest employment figures, Allen Simpson, chief executive of the lobby group UK Hospitality, said: “Hospitality is being hit by costs at every angle and it is the cumulative effect of this growing tax burden that is resulting in the number of people employed in hospitality continuing to fall.
“Looming business rates increases are only making things worse and the government needs to act urgently to bring forward a hospitality-wide solution that averts those hikes. If it doesn’t, we will only see job losses and business closures accelerate.”
UK wage growth excluding bonuses weakened to 4.5% from 4.6% in the previous quarter, while including bonuses, it slipped to 4.7% from 4.8%, the ONS said. The figures were in line with what economists had predicted.
Liz McKeown, the director of economic statistics at the ONS, said: “The number of employees on payroll has fallen again, with reductions over the last year concentrated in retail and hospitality, and reflecting ongoing weak hiring activity.
“Wage growth in the private sector has slowed to its lowest rate in five years, while public sector wage growth remains elevated reflecting the continued impact of some pay rises being awarded earlier than they were last year.”
Private regular earnings growth, a leading indicator for the Bank of England, fell to 3.6% in the three months to November.
While there was a slight increase in vacancies, the overall number has remained broadly flat over the past six months, after a long decline, McKeown said.
Economists noted that more people were joining the workforce. “Despite sickness-related inactivity remaining at historically high levels, the overall share of working-age adults classed as inactive was close to a near six-year low, a positive sign for the economy’s supply side,” said Martin Beck, the chief economist at WPI Strategy.
There were 155,000 working days lost because of labour disputes across the UK in November, the highest number since January 2024, with more than half lost in the health and social work sector because of strikes by resident doctors in England.
The labour market has weakened significantly over the past year. Unemployment has jumped to 1.8 million, and the number of vacancies has fallen to below the average before the Covid pandemic.
Employers have become more reluctant to retain staff and advertise for new workers after Reeves pushed up employers’ national insurance and the minimum wage last year.
Jake Finney, a senior economist at PwC UK, said: “The labour market is weakening as elevated policy uncertainty and weaker hiring start to bite. As is often the case when the labour market slows, young people are at the sharp end of the rise in unemployment.”
City economists expect the Bank of England to cut interest rates at least twice this year, from 3.75% to 3.25%, in response to the weaker outlook for jobs and inflation.
Finney said Tuesday’s employment figures were “unlikely to move the dial” on the decision over a rate cut next month, and a cut in March appeared more likely.
The work and pensions secretary, Pat McFadden, said: “Today’s figures show there are 513,000 more people in work compared to this time last year, but also highlights why we must go further, especially for our young people.”
The ONS, the UK’s official statistics body, is trying to improve the quality of its data, after a scathing review found “deep-seated issues” and called for an overhaul of the organisation.
