ARE Labour destroying labour? Experts have blamed the government for “economic neglect” after new data showed the unemployment rate at a four-year high. One said Labour has effectively put down the economy.
The UK unemployment rate for people aged 16 years and over was estimated at 5.2% in October to December 2025. This is the highest rate since 2021, up in the latest quarter and above estimates of a year ago, according to official data published this morning.
The number of payrolled employees for January 2026 decreased by 134,000 (0.4%) on the year, and by 11,000 on the month, to 30.3 million.
Payrolled employees in the UK fell by 121,000 (0.4%) between December 2024 and December 2025, and decreased by 6,000 between November 2025 and December 2025.
The UK employment rate for people aged 16 to 64 years was estimated at 75% in October to December 2025. This is down in the latest quarter, but unchanged on estimates of a year ago.
The estimated number of vacancies has remained broadly flat across recent periods and the annual growth in employees’ average earnings in Great Britain was 4.2% for both regular earnings and total earnings in October to December 2025.
Annual average regular earnings growth was 7.2% for the public sector and 3.4% for the private sector. Adjusted for inflation, it was 0.5% for both regular pay and total pay in October to December 2025.
David Belle, Founder and Trader at Fink Money, entirely blames Labour for rising unemployment.
He added: “Labour, whatever they claim to the contrary, weren’t the recipients of a mismanaged economy. The economy was actually doing quite well before they were elected. July 2024 is when we started seeing a complete collapse in business confidence.
“It’s also when we started seeing the inflation uptick and vacancies plummet. The most laughable thing about the Labour government is that none of them see this as a problem since nobody involved has resigned.”
Economic neglect
Mike Staton, Director at Mansfield-based Staton Mortgages, said it is “economic neglect”.
He continued: “Let’s stop saying that the UK economy hasn’t been managed – it’s effectively been put down. Labour have treated it like Old Yeller, namely taken it out the back and pulled the trigger. Under Rachel Reeves and Keir Starmer, we’ve got rising unemployment, falling vacancies, and wages cooling fast and they’re claiming it all as a victory in the name of progress.
“This isn’t stability, This is economic neglect. Businesses are freezing hiring, Young people are getting wiped out and households are being told, ‘Don’t worry, it’s working.’
“You don’t fix an economy by talking it down, taxing confidence out of it, and hoping the numbers behave. They didn’t rescue it, They didn’t rebuild it, They put it out of its misery. And now we’re all paying the price.”
Kate Underwood, Founder at Southampton-based Kate Underwood HR and Training, said small businesses are struggling to hire.
She added: “Labour can’t claim to be pro-worker while making it harder for small firms to hire workers. Those running small businesses aren’t villains. You’re staring at cashflow and thinking: can I afford another person without risking the whole business?
“Yes, Labour inherited a wobbly economy. But they’ve also added cost and uncertainty for employers. When employing gets pricier, recruitment freezes. Leavers don’t get replaced. Hours get trimmed. Pay rises get parked. That’s not ideology. That’s maths.
“And most UK ‘employers’ aren’t big beasts. They’re small businesses with tight margins and a real fear of getting employment law wrong and ending up in a tribunal because they rushed a decision. So are Labour destroying labour? Not deliberately. But if they turn hiring into a high-risk luxury, businesses will do less of it.”
Perfect storm
Kate Allen, Owner at Kingsbridge-based Finest Stays, said small businesses like hers are struggling.
She continued: “The latest jobs data reflects what many of us on the ground are already feeling. Rising minimum wage costs, increases in employers’ National Insurance and the pace of AI change have all added pressure, not relief, for small, people led businesses like ours.
“This isn’t a challenge created by one government alone, but it does feel like we are now seeing the perfect storm surface in employment numbers. For hospitality and service sectors especially, confidence to hire is fragile, and policy needs to balance protecting workers with keeping employers able to create jobs in the first place.”
Scott Gallacher, Director at Leicester-based Rowley Turton, said the figures show young people are struggling to get jobs.
He added: “The rise in youth unemployment is particularly worrying, though not entirely surprising. Higher employer National Insurance and minimum wage increases have pushed up the cost of entry-level hiring just as growth is meant to be the government’s priority, and without matching productivity gains many roles simply don’t stack up.
“Businesses will respond in the only way they can – by using more technology and fewer people where possible. The result is that young people and graduates are finding it harder to get that crucial first break.”
Rohit Kohli, Director at Romsey-based The Mortgage Stop, said he isn’t surprised by the figures.
He continued: “From where I sit as a small employer, the jobs data isn’t a surprise. You can’t increase employer taxes and add compliance costs into a soft economy and then act shocked when payrolls fall.
“Labour inherited problems, yes, but they chose the timing and the mix. Those choices raise the hurdle for hiring and investment, especially for small businesses with thin margins. The 5.2% unemployment rate is the signal, not the noise. Own it.
“If the goal is growth, start by reversing measures that make adding a headcount riskier than delaying. Stability and clarity beat ad-hoc revenue grabs. Policy should reflect that, and fast.”
Economic illiteracy
Samuel Mather-Holgate, Managing Director & IFA at Swindon-based Mather and Murray Financial, said Labour needs to amend its fiscal rules.
He added: “Higher taxes on jobs, higher taxes on businesses, higher taxes on workers, higher taxes on property and higher minimum wages are increased bureaucracy. This is the story of the Labour government so far. It is, therefore, no wonder it has resulted in sluggish growth and unemployment creeping up to its highest level in five years.
“The PM and Chancellor need a strategy to incentivise growth, cut taxes and boost the economy and they aren’t going to do that with their current ideas. Amending their fiscal rules in a disciplined way would be a way of stimulating the economy without spooking markets.”
Rohit Parmar-Mistry, Founder at Burton-on-Trent-based Pattrn Data, said we can’t solely blame Labour.
He continued: “Blaming Labour alone misses the point. We are witnessing the predictable endgame of neoliberal economics, an obsolete operating system embraced by every major party. Treating the UK economy like a household budget is economic illiteracy that has crippled small businesses and strangled disposable income.
“While costs spiral, we see ‘experts’ and firms like McKinsey promising AI will magically fix the labour market. It’s fantasy. In our work with businesses, we see firms hesitating to hire not just because of National Insurance hikes, but because their customers simply have no money to spend.
“No amount of automation solves a lack of demand. We need a reset, real investment that puts money into pockets to kickstart consumption, rather than stifling it to protect rent-seeking interests. Until we abandon this broken economic orthodoxy to focus on growth rather than extraction, the data will remain grim.”
Photo by Carl Tronders on Unsplash.
