The Work Foundation at Lancaster University responded to the labour market figures for December 2025 released by the Office for National Statistics. Ben Harrison, Director of the Work Foundation at Lancaster University commented:

“The UK labour market is continuing to lose momentum. Rising unemployment, falling vacancies and weak real wage growth all provide troubling signs for workers and jobseekers as we head towards 2026.

“Pay growth is weakening with real wages rising by just 0.5% on the year as inflation continues to eat away at wage increases. On average, workers have seen their real incomes rise by just £142.22 on the year – or £2.73 a week – meaning many will be feeling the pinch as Christmas nears. With limited economic growth and wage growth flagging, the success of the Government’s drive to bear down on the cost of living will play a critical role in whether workers see real wage growth in 2026.

“The marginal real wage growth we have seen is primarily being driven by above inflation rises in the public sector and in typically low pay sectors such as wholesale and retail. Meanwhile workers in financial services and construction are currently seeing annual pay growth below the rate of inflation.

“Unemployment is at 5.1%, its highest level for almost five years. This reflects a rise of 327,000 on the year, and has primarily been driven by more men and young people out of work. There are now 546,000 young people aged 18-24 who are unemployed – the highest since 2015 and up by 85,000 on quarter. Most worryingly it appears it is getting harder for these workers to access work. Long-term unemployment has risen by 93,000 on the year, with the challenge of finding work exacerbated by an increasingly competitive jobs market as vacancies are down on the year by 78,000.

“On the day that the Government has announced the Milburn Review into youth unemployment, these figures also lay bare the tough jobs market facing young people, and indicate policymakers must pick up the pace on boosting the number of secure, well-paid jobs through its Industrial Strategy and in rolling out additional tailored employment support to help people back into work quickly.”