LONDON, Sept. 16 (Xinhua) -- The United Kingdom's labor market continued to show weakness as high labor costs discouraged companies from hiring, the Office for National Statistics (ONS) reported Tuesday.
The unemployment rate for people aged 16 and over rose to 4.7 percent in the May-July 2025 period, up from both the previous quarter and a year earlier. During the same period, the number of payrolled employees fell 0.4 percent year on year and 0.2 percent quarter on quarter, according to the ONS.
Job vacancies also continued to decline. Between June and August, vacancies fell by 10,000 to 728,000, with half of Britain's 18 industry sectors reporting decreases. This was the 38th consecutive quarterly drop in vacancies. Compared with a year ago, vacancies were down 14 percent and remained 8.4 percent below pre-pandemic levels seen in early 2020.
Despite the softer hiring picture, wage growth remained resilient. Average employee earnings, including bonuses, grew by 4.7 percent in May-July, edging up from 4.6 percent in the previous three-month period.
Liz McKeown, ONS director of economic statistics, said the labor market "continues to cool," with fewer jobs reported and payroll numbers falling, though wage growth remains strong by historical standards.
Experts warn that high labor costs, amplified by employee-friendly policies, are discouraging recruitment and weighing on business expansion.
Jane Gratton, deputy director of public policy at the British Chambers of Commerce (BCC), said the national insurance hike is adding significant pressure: "Unemployment remains high and vacancies continue to fall, with firms having to make difficult decisions on recruitment." A BCC survey found that 73 percent of small and medium-sized enterprises consider labor costs their biggest financial strain.
Gratton added that sustained wage growth is feeding services inflation, echoing comments from the Bank of England Governor at the BCC's summer conference.
Alex Hall-Chen, employment policy advisor at the Institute of Directors (IoD), pointed to the Employment Rights Bill, above-inflation increases to the national living wage, and rising employer national insurance contributions as key factors weakening the business case for hiring.
The outlook remains uncertain. Helen Gray, chief economist at the Learning and Work Institute, noted that while economic inactivity is falling, many people returning to the labor market are seeking work rather than entering employment, suggesting redundancies may rise in the months ahead, a challenge particularly acute for young job seekers.
Still, there were some signs of optimism. Neil Carberry, chief executive of the Recruitment and Employment Confederation, said members of the confederation reported a slightly brighter outlook for the rest of the year after an unusually slow summer. He urged the government to avoid cost surprises in the coming Budget and adopt a pragmatic employment policy to support business growth. ■