Britain's unemployment rate has risen unexpectedly, while vacancies have plummeted to their lowest level in five years, as businesses come under pressure from the impact of the Iran war.
Official figures from the Office for National Statistics (ONS) reveal that the unemployment rate rose to 5 per cent in the three months to March, an increase from 4.9 per cent in the previous three-month period.
This rebound defied the prediction of most economists, who had anticipated that the rate would remain stable.
The ONS also estimated a sharp decline of 100,000 workers on UK payrolls during April, bringing the total to 30.2 million.
This represents the biggest monthly drop since May 2020, at the height of the Covid pandemic, although these figures are subject to future revisions.
Meanwhile, the number of available vacancies decreased by 28,000 quarter-on-quarter to 705,000 in the three months to April, marking the lowest level recorded since the same period in 2021.
Retail and hospitality businesses saw some of the biggest falls in payroll numbers and vacancies, and the ONS said businesses in the sectors were pointing to “economic and geopolitical uncertainty” as reasons for pausing hiring.
Meanwhile, regular profit growth also fell again, to 3.4 per cent in the first quarter, down from 3.6 per cent in the three months to February and the lowest level since October 2020, barely outpacing Consumer Price Index inflation, at 0.3 per cent.
Liz McKeown, director of economic statistics at the ONS, said: “The latest figures suggest the labor market remains weak, with vacancies at their lowest level in five years and unemployment higher than a year ago.”
He added: “Lower paid sectors, such as hospitality and retail, have seen some of the biggest falls in vacancy and payroll figures, both in recent months and over the last year.”
The figures come after recent warnings about rising unemployment as a result of the inflationary shock caused by the Iran war and the impact on consumer spending and the broader economy.
Last month, the Bank of England predicted that even in its most positive forecast, unemployment would reach 5.5 percent in 2027, a figure that would rise to 5.6 percent in a more extreme shock scenario.
Retail and hospitality businesses are considered to be especially exposed, having already been affected by rising labor costs in recent years.
The ONS said vacancies in retail fell by 7,000 quarter-on-quarter in the three months to April, while in the hospitality sector they were 11,000 fewer.
The number of workers on payroll in the sectors was also markedly lower: retail was estimated to have declined by 76,000 year-on-year in April and hospitality saw a drop of 75,000.
This is having a big impact on young workers, who traditionally find work in those sectors, with the ONS revealing that the unemployment rate among 16 to 24-year-olds jumped to 16.2 per cent in the three months to March, the highest level since 2015.
Work and Pensions Secretary Pat McFadden highlighted that the latest figures also show there are 416,000 more people in work than a year ago.
He said: “While this is encouraging, we know that the conflict in the Middle East is casting a shadow on the labor market.”
