UK Unemployment on the Rise in 2025 – What’s Really Going On?

Exploring the latest job losses, youth unemployment trends, skills shortages, and small business challenges in the evolving UK job market.

The UK’s job market is feeling the strain. As of spring 2025, unemployment has quietly crept up to 4.6% — the highest it’s been in nearly four years. That’s over 1.7 million people out of work (source: Office for National Statistics – Employment in the UK, June 2025). Whether you are a young person struggling to find work or a business owner navigating higher costs, chances are you have felt the impact of the shifting job market — from big-company layoffs to pressure on small firms — and young people trying to get a foot in the door.

 

Who’s Being Hit the Hardest?

The current employment outlook in the UK is changing, and the rise in unemployment isn’t hitting everyone equally. Here’s a snapshot:

• Retail, hospitality, and leisure sectors are seeing major cutbacks. Higher taxes and operating costs have forced many to close or downsize.

• Young people are bearing the brunt, with youth unemployment now over 14% — a rate more than triple the national average. Source – Commons Library Youth Unemployment Briefing, 10 June 2025 (PDF)

• Regional differences are widening, with places like London and parts of the North seeing bigger job losses.

Even some traditionally stable industries like finance, healthcare, and tech have made large-scale redundancies over the past year. Even medical students — after years of study — are now struggling to secure the training positions they need to qualify as doctors in the NHS. This highlights issues with long-term workforce planning and a lack of government foresight (Dr ErmaDerma).

At the same time, some industries are still struggling to fill jobs. One example is the shortage of lorry (HGV) drivers (source). These jobs are available, but many go unfilled because of long hours, difficult working conditions, and pay that doesn’t always match the responsibilities. It’s a reminder that job vacancies and unemployment can exist at the same time — often because the jobs people need and the jobs being offered don’t always line up.

 

What’s Causing the Job Losses?

The 2025 UK job market slowdown reflects a mix of structural and short-term economic pressures.

A few key factors are combining to make life harder for employers and workers:

• Rising business taxes, especially the recent hike in employer National Insurance, have increased the cost of keeping staff.

• Higher interest rates have made loans more expensive, slowing investment and hiring.

• Global uncertainty, including trade tensions and supply chain issues, has made it harder for manufacturers and exporters to stay competitive.

Business groups have labelled this a perfect storm — a mix of rising taxes, rising costs of operations, high borrowing costs, and a lack of long-term investment in workforce planning. Many are calling on the government not just to rethink tax policy, but to prioritise sustainable growth — not just through tax tweaks, but through serious long-term investment in skills, infrastructure, and job creation rather than short-term profit measures only for big corporations.

 

Is This Like the 1990s All Over Again?

For many readers, the early 1990s might feel like distant history — or not history they lived through at all. But it was a time of serious economic strain. UK unemployment soared to over 10% during the 1991–1993 recession (source – BBC analysis of 1990s UK unemployment), and young people were particularly hard hit as entire sectors shrank or collapsed.

Today’s unemployment rate is lower at 4.4%, but the pace of the recent rise — and the impact on young people and workers across different sectors — has drawn comparisons.

While the context is different, and this may be a different type of economic downturn altogether, the warning signs — particularly for younger workers — are still worth noting. So far, the situation does not appear to be as severe as the early 1990s, when interest rates were in double digits and unemployment soared. But there are parallels in how certain groups are being affected and in how economic pressures are slowing down job creation — especially for those just starting out in their careers.

 

Why It Matters to Us

At Ratcliffes, we work with many small business owners  — people who are often first to feel the pinch when the economy shifts. We also understand that unemployment isn’t just a number. It’s about livelihoods, families, futures — and the individual stories behind every statistic that numbers alone can’t tell. And because we are in the business of helping people protect what matters most — their vehicles, businesses, and livelihoods — we see first-hand how economic uncertainty affects real lives.

We have seen tough times before — and we know communities can rally. Whether it’s support for small business owners, young people navigating career starts, or workers affected by the changing job landscape, resilience is key.

In Part 2, we will explore the flipside: how people are responding with creativity and community support. And how small businesses, new startups, and local organisations (including our own involvement with charities) are stepping up to help.

 

 

Next Up: Part 2 – Rising to the Challenge: How People and Businesses Are Fighting Back