The United Kingdom’s unemployment rate has risen to 5% in the third quarter, marking the highest level since early 2021. According to data from the Office for National Statistics (ONS), this increase surpasses analysts’ expectations of a 4.9% rate. The ONS reported that the unemployment rate climbed from 4.7% in the second quarter, amid weak economic growth in the UK.

The latest figures come ahead of the UK government’s annual budget, scheduled for November 26, which is expected to include tax increases to drive down government debt and fund public services. The Labour government, led by Prime Minister Keir Starmer, is facing significant challenges, with the party trailing in popularity polls 16 months after winning a general election.

Liz McKeown, ONS director of economic statistics, noted that “the number of people on payroll is falling, with revised tax data now showing falls in most of the last 12 months.” Analysts have expressed concern over the impact of the rising unemployment rate on the economy, with Isaac Stell, an analyst at investment manager Wealth Club, stating that “there will be no pre-budget comforts that can be taken from today’s employment data.”

Stell added that the combination of a rising unemployment rate and shrinking wage growth will likely lead to businesses postponing hiring and investment decisions until the economic outlook becomes clearer. However, some analysts believe that the weak data may increase the chances of the Bank of England cutting its main interest rate at its next monetary policy meeting in December, which could provide some relief.

Finance minister Rachel Reeves has indicated that the upcoming budget will include tax increases, aimed at reducing government debt and funding public services. The UK government faces significant challenges in addressing the country’s economic woes, and the latest unemployment figures will likely be a key consideration in the budget deliberations.

The rise in unemployment has significant implications for the UK economy, and the government’s response to the challenge will be closely watched. As the country approaches the budget announcement, businesses and individuals alike are eagerly awaiting the government’s plan to address the economic slowdown and mitigate the impact of rising unemployment.